Moreover, while banks are keen to collect deposits in rural areas they are less willing to lend. For every taka deposited or collected in rural areas by banks, only half of this amount is lent there, the study revealed.

The joint study 'Access to Rural Finance' was conducted by Bangladesh government, the World Bank and the UK's Department for International Development (DFID).

It found that bank lending to agriculture and rural small businesses has been decreasing significantly in recent years.

This shortfall was not being made up for by microcredit, as small enterprises and small and medium farmers are not traditionally microcredit clients.

Bangladesh Bank and World Bank last week jointly organised a seminar on the study and highlighted examples of countries where banks had been able to increase lending in rural areas.

The study also examined the role of Bangladesh's financial institutions, including state-owned Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnnayan Bank (RAKUB), commercial banks and microfinance institutions.

The study found that while the two agricultural banks provide limited services to the agricultural sector, their outreach is seriously constrained by 'very weak financial performance.'

In addition, the two banks act as 'insurer' of last resort on behalf of the government, by waiving principal and interest in times of natural calamities.

Private commercial banks do not serve rural areas partly due to their limited branch networks and partly because their products and procedures are not suitable for small transactions.

In a separate workshop that also looked at financial services in rural areas, jointly organised by Palli Karma Sahayak Foundation (PKSF) and the World Bank, the prospect of introducing index-based weather insurance in Bangladesh was explored.

Bangladesh has no agricultural insurance scheme as the government-funded crop insurance scheme in the mid-80s was stopped due to heavy losses.