53pc rural enterprises lack access to finance, finds WB

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FE Report
At least 53 per cent of the country's rural enterprises-both agricultural and non-agricultural-still consider the lack of access to finance a major roadblock to their operations, according to a recent World Bank study.
'The rural small businesses and farmers are severely constrained by the lack of their access to finance,' the study conducted by the multilateral development bank said.
The study also found some challenges in lending to the agriculture sector, which included government interventions, internal and external constraints, and non-performing assets.
There should be considerable investments in the country's agriculture sector to make the sector more commercial and add an impetus to its non-agriculture activities, it said.
The WB recently conducted the study and published a report on it under the title 'Access to rural finance in Bangladesh: The forgotten missing middle.'
According to the report, a half of every taka deposited or collected in rural areas goes back as loans.
This is mainly because of inability of the institutions operating in rural areas to develop appropriate financial products matching the demands from the farmers or small rural businesses, it added.
The major findings of the report were discussed in the city Sunday at a seminar, which was organised by the WB in collaboration with the Bangladesh Bank (BB), the Palli Karma Sahayak Foundation (PKSF) and the Insurance Association of Bangladesh (IAB).
WB's senior private sector development specialist Aurora Ferrari, BB executive director Naba Gopal Banik, WB acting country director Zahid Hussain, IAB chairman AKM Rafiqul Islam, PKSF deputy managing director Mosharraf Hossain and WB's Bangladesh operational advisor Mohamed A Toure, among others, took part in discussion on the report.
According to the report, the rural small businesses and the farmers are central to the country's development, in terms of both current employment and contributions to Gross Domestic Products (GDP). Yet the operations of the rural agricultural enterprises suffer due to their inability to access finance from both banks and micro-finance institutions (MFIs).
The commercial banks need to re-engineer their operations to enter a new market segment. The MFIs, on the other hand, need to transform from the conventional group methodology to individual lending which several MFIs have already started, it suggested.
Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank (Rakub), which are supposed to be the main providers of financial services in rural areas are deeply insolvent, Aurora Ferrari said.
Apart from this, she said while MFIs operate in rural areas, they focus on the landless and do not have appropriate lending methodologies to serve the bigger and more complex clients.
With suitable products and technology, she said the MFIs could scale up their lending to micro and small enterprises and marginal and small farmers.
Referring to the farmers' sufferings due to weather fluctuations and natural disasters like flood, the WB said innovative products such as index-based agricultural risk insurance schemes are needed to objectively reduce the risks.
It also suggested helping banks to increase lending to micro, small and medium enterprises (MSMEs), ensure an enabling environment for them by reviewing rules on provisioning requirements and create a technical assistance fund.
Presenting a paper at the seminar, managing director of Sonali Bank SA Chowdhury said the total rural households in Bangladesh are estimated at 16.29 million, out of which just more than 15 per cent are being serviced by public sector institutions (PSIs) despite their large numbers of rural branches.
He also said the agricultural credit flow should be increased to at least 25 per cent of the total credit volume of the country from the present level of below 10 per cent in order to support the expanded farming activities.