AGRICULTURAL FINANCING INITIATIVES OF EBL

Overview

IntroductionBB Agri & Rural Credit Policy and Programmes

EBL’s Agro FinancingTarget Customers & Target Areas

Product FeaturesDocumentations

Monitoring & RecoveryThe Way Forward

EBL’s Initiatives for Direct Agro Financing

Introduction• Now a days ‘Food Security’ has become a global

concern and it has a direct influence on the nation’s economy

• Agriculture sector’s contribution to country’s GDP has drastically fallen from 20.49% in FY 2008-09 to 18.70% in FY 2012-13 (BBS, 2013)

• Inspite of falling sectoral share of GDP, still Agriculture sector has been considered to be the single largest GDP earning sector of the country

• As a whole, ‘food security’ and ‘sustainable economic development’ of the country cannot be ensured without taking appropriate steps for the development of Agriculture sector of the country

Introduction (contd.)• Banks can play important roles for the

development of Agriculture and Agribusinesses of the country

• Bangladesh Bank’s Agricultural & Rural Credit Policy and Programmes is the policy booklet to ensure how banks have to contribute for ‘Food Security’ as well as ‘Sustainable Economic Development’ of the country

• BB instructed all scheduled commercial and specialized Banks of the country to follow the instructions mentioned in its policy booklet

BB Agri and Rural Credit Policy & Programmes

As per BB policy, every scheduled Bank has to disburse Agricultural & Rural Credit at least 2.5% of its loans & advances. BB relaxed that criteria in FY 2012-13 & onwards for private & foreign commercial Banks by setting targets for those Banks considering around 2% of their loans & advances instead of calculating 2.5% (actual targets are mentioned by BB in the policy booklet which is revised every FY). But if any Bank fails to achieve this relaxed target which is mentioned in the BB Policy booklet, that Bank must have to deposit the shortfall amount of target at the end of financial year to Bangladesh Bank without any interest for next 1 (one) year.

EBL’s Agro Financing• As per Bangladesh Bank’s directive, EBL has

been financing to agricultural & rural businesses since 2009 mostly through different local & international reputed NGOs/MFIs, e.g. ASHA, BRAC, Bureau Bangladesh, Shakti Foundation, Jagorony Chokro, TMSS, Uddipon etc due to not having own banking networks in rural areas.

• In 2011, EBL formed its Agricultural Business Unit under SME Banking Division to finance directly to the farmers in some selective areas of Dhaka district, primarily at Savar & Dhamrai area.

EBL’s Agro Financing (contd.)

(Amt. in BDT. Crore)

FY Target Achv Percent2010-11        30         33      110%

2011-12 114       115      101%

2012-13 144       173         120%

Target Customers & Target AreasAgriculture is a vast sector comprising of 3 (three) core sub-sectors namely –• Crops• Fisheries• Livestock & Poultry

Besides, it has some prioritized/specialized sub-sectors namely –• Agricultural Machineries/Equipments• Integrated Dairy & Poultry Farming with Biogas Plant• Solar Energy Based Agricultural Machineries • Agro Based Industries

Target Customers & Target Areas (contd.)

• As per the guideline of ‘Agricultural & Rural Credit Policy and Programmes’ of Bangladesh Bank, EBL has been financing to most of the sub-sectors of Agriculture since 2009 through various linkage programs with NGOs/MFIs

• After forming Agricultural Business Unit in 2011, EBL has started financing to 2 (two) major sub-sectors of Agriculture namely Crops & Agricultural Machineries/Equipments through its direct lending programs

• Besides, EBL has corporate business relationships with a number of reputed agro based industries of our country like PRAN, SQUARE etc.

Product Features

EBL launched 2 (two) PPG based agro financing products for its direct agro lending programs:

• EBL KRISHI RIN (2011) – for financing to crop cultivation

• EBL PROJUKTI (2013) – for financing to agri machinery/equipment purchase

Product Features (contd.)EBL KRISHI RIN:

• Loans for individual Farmers/Share Croppers• Loan limit Min. 10K to Max. 150K• Loan will be given for one time or revolving basis for

Max. 1 year• Repayment tenor 3-12 months which depends on

harvesting plan of crops• Interest @13% p.a. only• No collateral required• No loan processing fee required• Customer’s age limit 22-60 years

Product Features (contd.)EBL PROJUKTI:

• Loan for individual farmer to purchase agricultural machineries and irrigation equipments

• Loan limit Min. 10K to Max. 150K• Interest @13% p.a. only• Quarterly installment-based term loan facility for Max. 2

years• No collateral required• 2% processing fee required• Max. 70% of machinery price as Loan• Customer’s age limit 22-65 years

DocumentationsRequired documents for EBL KRISHI RIN & EBL PROJUKTI:

• National ID Card/Any Photo ID• Agricultural Input Assistance Card (AIAC)/UP Chairman’s

Certificate• Personal guarantee of one family member• In case of financing to share cropper, personal guarantee of

land owner• One post dated/undated signed cheque of client as Security• Simple hypothecation of crop or machinery• NOC from local Banks and/or CIB report from Bangladesh

Bank

Financing Import Substitute Crops @4% Interest Only

As per BB circular, there are four categories of crops which should be financed @4% subsidized interest rate. These crops are –

• Maize• Oil seeds• Spices• Pulses

BB provides rebates/incentives @6% for financing to the above mentioned four categories crops.

Monitoring & Recovery• Agricultural credits which are financed directly to the

farmers are monitored and recovered by the same Team Members of Agricultural Business Cell under SME Banking Division. This Cell is being operated by a number of dynamic SME Team Members of EBL.

• By implementing proper monitoring and recovery strategies, keeping close contact with the clients, providing them necessary consultancy services for better crop production and influencing them to adopt modern agricultural best practices, Agricultural Business Cell has experienced successful management of the increased portfolio throughout its of journey since inception.

The Way ForwardSome issues need to be addressed by BB:• BB’s present Interest Rate (10%) policy on agro financing for

the Banks needs to be revised. As MFIs are allowed to finance in higher interest rate, the same should be applicable for commercial banks as they also require additional manpower/operational costs for providing agricultural finances in rural areas. With regard to sustainable and effective agro lending, banks must have business justifications.

• As per Bangladesh Bank’s BRPD Master Circular No. 14, dated September 23, 2012, provisioning rate for Short-Term Agricultural & Micro Credit is 5% Standard (UC) loans whereas it is 0.25% for SME Standard (UC) loans. This higher provisioning policy for both short-term agri & micro credits is not supportive for the Banks to increase agricultural & rural credit disbursements.

EBL’s Initiatives for Direct Agro Financing

(Photo Gallery)

EBL Financed to Maize Cultivators @4% Interest Only

EBL Financed to Oil Seed Cultivators @4% Interest Only

EBL Financed to Vegetable Growers at Savar

EBL Financed to Banana Cultivators at Dhamrai

EBL Financed Farmers to Buy Power Tillers

EBL Exchanged Views withFlower Traders & Cultivators

EBL Financed to Flower Cultivators

EBL Arranged Day-Long Farmers’ Training Program

Thank You