Rural financing the innovative way

Khondkar Ibrahim Khaled
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There is a perception that rural development means construction of roads and bridges in the rural areas. These activities are strategies of development and means of development. Such activities facilitate development, but do not ensure growth.

Development essentially means economic development, and economic development means financial betterment leading to improvement in the quality of life of concerned people. Hence development is a complicated and painstaking process involving financing as well as human factors. It is never a smooth mechanical process. Finance is described as lubricant of development.

At present, gap between the poor and the rich is very wide. Another strange phenomenon in Bangladesh is its continuous good level of growth rate of national income and simultaneous increase in number of poor people living below the poverty line. This contradiction may be explained by the proposition that phenomenal growth has been achieved by the richer section of people while the poorer section remain outside the growth range. Marginalised poor people are sinking below the poverty line, probably getting no ladder to go up.

If we draw poverty shades in the geographical map of Bangladesh, the country will be economically divided into two zones - (i) poverty zones comprising mainly rural areas and (ii) prosperous zones comprising city and urban areas. Bangladesh is now a country of two economies.

This reminds us another chapter of our past history. During the decade of sixties, we were vocal about two economies. Bengali leaders stormed the Pakistan parliament and intellectuals placed facts and figures before the people to fight against disparity of two economies. Geographically the two economies were erstwhile East and West Pakistan. East was poor and deprived. West was better off and privileged. Two economies gave rise to six-point movement which led to the war of liberation, leading to independence of Bangladesh.

Economic disparity exists in every society and in all countries. What matters is the scale of tolerance. Ironically, the nation which fought against economic disparity, is now engulfed with the same problem. In 1972, we were poor, but we lived in a society of relative equality. Now, a small section of people has accumulated fabulous wealth leaving the larger section of people in poverty. In 1975, we killed the architect of our independence and deleted the essence of liberation war from our constitution. This was done by a bunch of robbers, looters and grabbers, who seized the driving seat of the statecraft. They looted wealth successfully to build up substantial capital for spectacular take-off. Subsequently, a better professional entrepreneur group emerged to join the development process. All those happened in the city area. This small but strong capitalist group succeeded in maintaining over five percent national income growth for the country. They are few in number, but fabulously rich in wealth.

It is suggested that only 5 percent of the population enjoy 45 percent of the national wealth. They are all city-dwellers. It is further suggested that around 40 percent of population enjoy around five percent of national wealth ! They live in the rural areas and also in the city slums. The divide is crystal clear. Top class is not only rich, they are brutally powerful. They do not believe in sharing and caring. They believe in accumulation only.

Only way to thwart the process of increasing gap is to plan and act for rural development. This needs to be supported by democratic government, which represents the poor people and possesses the strength to neutralise the brutal power of urban rich class. Let us examine, how rural development process may gain momentum without disturbing the urban rich class.

In other words, we are suggesting to develop and nourish rural income for generating surplus leading to formation of rural capital. We do not suspect any dearth of entrepreneurship in the rural areas. Rather, lack of flow of money is blocking entrepreneurial prospects. Capital (money) and capability (entrepreneurship) together ensure production of goods and services.

Since the problem is staggering, the interventions should also be strong. To make a good beginning, let the government use and misuse money in the rural areas. Let the government spend and waste money in the rural economy. Money can be spent on any account - safety net, agriculture, roads and bridges, education, health, marketing, cottage industry, small and medium industry and many more.

Rural farmers are excellent entrepreneurs. Before independence, we could not produce foodgrain for seven crore people. Now the farmers are feeding fifteen crore people by using same cultivable land. They have done miracle at their own cost ! They sell paddy almost at cost price, opportunity of making surplus is brutally snatched away. Hence intervention of finance and force is needed to counter the process.

It is heartening to note that the present government in their first cabinet meeting decided to provide good amount of subsidy for fertiliser. Government subsequently increased subsidy even against on strong opposition by donor agencies. Some items of fertiliser -selling at Tk.60 per kg are now available at Tk.24. This intervention should be supported by some more programs like low-cost agriloan of appropriate amount, development of growers co-operatives for marketing of rural produces, developing rural capabilities for creating and using surplus fund in the rural areas.

Situation demands innovation of appropriate bank branches and operations to suit present weak rural economy. About two-thirds of unions have no bank branches, because traditional banks are not viable there. Absence of bank means absence of flow of money and absence of institutions for financial intermediation. Government banks are aware of this problem, but committed efforts are yet to be seen.

Meanwhile banks operating in the rural areas mainly for agricultural finance, are visibly engaged in blocking the leakages and improving operational standards. For example, Bangladesh Krishi Bank, largest agri-financing bank of the country, was defending against charges of field level corruption and inefficiency. Now, it has taken aggressive corrective measures to meet the challenges. The bank is disbursing agri-loans in camps in front of hundreds of people. Corruption cannot take place in broad daylight in presence of so many people.

Farmers who for some reasons cannot turn up in the camps, are allowed to receive loan from branch premises under an innovative 'peoples audit system'. Under this arrangement, name, address and amount of loan disbursed to all farmers in a day will be tabulated and hanged in a notice board for people's inspection for next ten days. Such measures of visibility, transparency and accountability have brought in spectacular results. New borrowers are coming to rural branches in large number and complaints of corruption has dwindled to marginal level.

Banks are working on a target to disburse around twelve thousand crore taka as agri-loan by end June, 2010. Success of banks will increase money-flow in the rural areas. Higher crop production is expected. By providing fair price to growers, generation of surplus in the rural economy can be ensured. Let us watch and wait.

The author is the chief of Bangladesh Krishi Bank.

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