The Agricultural and Rural Credit Policy issued by Bangladesh Bank comprehensively promotes finance to the agriculture sector.
Through the policy, banks:
• are to set a comprehensive annual program for financing agriculture, which includes a list of priority financing areas and an annual target;
• are provided with access to refinancing facilities for sharecroppers, milk production and artificial insemination, and jute production;
• benefit from an interest rate subsidy for loans to maize, pulses, oilseeds, and spices; and
• are obliged to prioritize disadvantaged farmers, including women, tribal, and coastal farmers.
The policy has been effective in increasing finance to the agriculture sector.
Key factors in the success of the policy include the following:
• Regionalization – the annual program is set through regional Agricultural and Credit Committees, which are multi-stakeholder groups operating within specific districts;
• Cooperation with the Agricultural Ministry – the Agricultural Ministry works with the Committees to inform them of priority agricultural commodities and their specific financing needs (such as crop cycles), which enable the policies to provide finance in a timely and efficient manner; and
• Efficient delivery – banks are encouraged to use microfinance institutions as a delivery channel, which enables them to achieve penetration across dispersed rural areas and address financial inclusion challenges.