The government and the central bank have been vigorously pushing for greater 'financial inclusion' in recent years with a pious intent. But the opposite is happening on the ground, unfortunately. Agricultural loan having the largest share in the total volume of fund that the banks disburse in rural areas remains the key indicator as far as so-called financial inclusion is concerned. A survey conducted by the 'Missing Middle Initiative Project' of the UN Food and Agricultural Organisation (FAO) has recently revealed a very disturbing picture in relation to the disbursement of farm loans to small and marginal farmers.
The FAO survey has found that only 17 per cent of the farmers having small land holdings have access to loans disbursed by both specialized and commercial banks. The situation is worse in the case of marginal and women farmers. What has been brought to the fore by the survey will surely evoke surprise among those who have been following the campaign of 'financial inclusion' for the past few years. Obviously, marginal farmers are strong candidates for such inclusion and the state-owned specialized and commercial banks are supposed to play a leading role in this respect.
But if only 7.19 per cent of the farmers belonging to this category have access to funds disbursed by the Bangladesh Krishi Bank (BKB), the Rajshahi Krishi Unnyan Bank (RAKUB) and the Bangladesh Rural Development Board (BRDB), the state of 'financial inclusion' is easily understandable. There must be certain reasons for poor coverage of both small and marginal farmers by the formal credit institutions. Either they deliberately avoid these farmers or certain influential quarters somehow take away bulk of the rural credit being disbursed.
However, there are others, including non-governmental organizations and mahajans (private creditors) to fill the vacuum. The poor and marginal farmers borrow money from NGOs and other informal sources at higher rates of interest. Mahajans who levy cutthroat lending rates are easily accessible unlike the formal credit institutions.
There is no denying that operating the process of 'financial inclusion' through the disbursement of higher volume of credit in rural areas has largely been confined to the state-owned specialized and commercial banks. The involvement of private sector banks that now dominate the sector is highly insignificant despite the central bank's persuasion to expand their coverage in rural areas.
However, the specialized banks are now carrying a huge load of non-performing loans, primarily because of their poor quality lending operations. Allegations are galore that bulk of the credit disbursed by formal banking institutions is eaten up by local influential people and their agents in connivance with section of dishonest bank officials.
Moreover, the disbursement of agricultural credit reportedly has remained well below the target in recent months. The development has given rise to negative flow of resources in the rural areas, meaning that the volume of deposits is larger than the money the banks offer as loans to farmers and relevant others. Such negative flow of resources could be largely contained had the banks made available adequate volume of credit to small and marginal farmers. The formal lending institutions do often consider these people non-bankable. In contrast, NGOs and rural money lenders usually take them as good borrowers.
The truth is that small and marginal farmers find the environment, created deliberately or otherwise, in rural bank branches not at all friendly. Seen in the context of the government's policy of 'financial inclusion', such a scenario is not desirable, to say the least. So, there has to be a change in approach of the formal lending institutions working in rural areas.
