ACSPD Circular No. 10: Disbursement of Agricultural/Rural Credit

Bangladesh Bank Head Office P.O. Box No. 325 Dhaka Bangladesh www.bangladesh-bank.org.bd

Agricultural Credit & Special Programs Department (Agricultural Credit Division)

Ref No.: ACSPD Circular No. 10 Date: 14 Ashwin, 1415 29 September, 2008

All Scheduled Banks Operating in Bangladesh

Dear Sir/Madam,

Regarding the Agricultural/Rural Credit Disbursement Program. (Disbursement of Agricultural/Rural Credit)

Recently, due to various reasons, agricultural production has been hindered, leading to a reduction in the supply of agricultural products. Consequently, the country is facing food shortages. Due to lower-than-required agricultural production, dependence on the import of agricultural products is gradually increasing. There is no alternative to increasing domestic agricultural production to reduce food shortages. It is extremely urgent to increase credit/advances in the agricultural sector to bring agricultural production to the desired level. Increasing credit/advances directly contributes to increasing production by helping farmers procure improved seeds, fertilizers, etc. In this context, the following decisions have been taken to ensure food security by increasing credit/advance disbursement and thereby increasing agricultural production:

a) All scheduled banks operating in Bangladesh, including private and foreign banks, must participate in the credit disbursement process in the agricultural sector.

b) Each bank will set a target for allocating a portion of its total loan portfolio to the agricultural sector. This target must be determined at the beginning of each fiscal year and communicated to Bangladesh Bank. The target must be realistic, and regular monitoring must be conducted by the respective bank to fully achieve the declared target.

c) Banks that have not determined a target for agricultural credit disbursement for the current fiscal year (2008-2009) must immediately determine a target and inform Bangladesh Bank.

d) If the target determined by a bank does not appear realistic to Bangladesh Bank, Bangladesh Bank will issue instructions for the revision of the target.

e) Credit disbursement in the agricultural sector must be carried out using the "Area approach" method, giving priority to regional crop production and types of crops, i.e., focusing on areas where specific crops yield well. Sufficient credit must be disbursed for all crops in areas where sufficient vegetables, onions, ginger, garlic, pulses, bananas, betel leaf, chili, potatoes, etc., are produced. Arrangements must be made to obtain area designation and lists of actual farmers from the Department of Agricultural Extension. In areas where opportunities for fish farming exist under the Area approach method, sufficient credit must be disbursed to fishermen. Assistance may be obtained from the local offices of the Department of Fisheries regarding this matter.

f) Banks that do not have branches in rural areas or whose number of branches is insufficient shall disburse credit to the agricultural sector through NGO-linkage. However, the banks must ensure that the disbursed credit is being used properly in the agricultural sector.

g) The above decisions will come into effect immediately.

Please acknowledge receipt.

Yours faithfully,

(Md. Abdul Haque) General Manager Phone: 7120947