here is class note for
Average amount per loan =
Per household with positive amount =
Per Capita loan =
18. College
Chapter-4
Concept and Needs of Agriculture Credit
Credit delivery system concepts and agencies involved.
Nature of rural indebtedness.
Agriculture credits sources and types.
Requisites of agricultural credit system.
4. Economic Dualism in Nepal
Basically the Nepalese economy is dualistic in its structure with the small newly emerging organized economic sector based on trade industry and services coexisting with the vast traditional rural economy. The modern sector has all the semblance of a developed economy with a well developed physical infrastructure administrative networks financial institutions, fully monetized and integrated exchange economy with free mobility of resources. As a hub of modern industries, trade and centre of major savings with investment decisions; there is naturally a great deal of interactions between the private interests and the public policies.As against the modern sector, there is the vast rural sector with rudimentary methods of production and organizations with traditional feudal economic relations and exploitation. As saving and investment are low, both production and productivity are low. As a subsistence economy, a good deal of output is for self-consumption without much marketable surplus. Exchange is, therefore, limited and money and market are mostly irrelevant. The people have few opportunities and few possibilities, poverty is acute and underemployment is widespread. At the root of rural poverty, there lies the cumulative process of degeneration and deterioration in productive capacity of the masses largely due to accumulation of idle labor on land and concentration of productive assets in the hands of the few. With the passing of time and growth of population, the rural economy became weaker, bringing marginal land in use, accentuating food shortages, creating widespread unemployment and ecological imbalances. The vast rural economy has been a lagging sector rather than a leading one, providing capital, labor, food, fiber and market which are all essential pre-conditions for industrial development on a sustainable basis as essential as road, bridges and power houses. While the affluent sections of population in urban pockets with their newly found fortunes made even in a dubious manner; are indulging in a vulgar display of their wealth, the low income class are finding life increasingly difficult to pull on and the vast silent majority in rural areas are continuing to remain languished under grinding poverty.
4.1 Why agriculture credit?
Agriculture is an important industry for the agrarian country like Nepal Rome to Scotland
The need of agriculture credit are as follows.
· To increase per-capita income of agrarian peole.
· To transform the traditional agriculture systeminto appropriate modern agriculture system.
· To improve the agro-based, cottage and small scale industries.
· To increase the production and productivity of the rural sector.
· To control the internal migration.
· To manage the social inequality.
· For poverty reduction of amall farmers.
4.2Classification of agricultural credit
There are different types of Agricultural credit found in the Nepalese context. They can be classified as follows:
a) Propose wise ( development credit, production credit )
b) Period wise ( short term, medium term, and long term)
c) Security wise (collateral, farm mortgage credit and personal credit)
d) Creditor wise (private, nongovernmental and government)
4.3 Credit delivery system in Nepal
Farmers require short term credit for financing annual crop operations and medium term and long term credit for improving farming conditions. Besides, rural poor people require credit for many other reasons such as to celebrate feasts and festivals, to perform religious duties, cultural activities, for medicinal purpose, for housing, to educating their children etc. Credit delivery system in Nepal
1. Institutional (Organizational Sources)
2. Non- institutional (Unorganized Source)
1. Institutional (Organizational Sources)
Institutional Sources for credit delivery are the co-operative societies, Agriculture Development Bank, commercial banks, Grameen Bikash Banks and Non-Government Organization etc. These sources provide credit to the needy people in the basis of security deposited, group security or scheme proposal prepared by them. Though the institutional credit is insufficient, it is systematic way of credit delivery. In an estimate during the Ninth Plan period only 20 percent credit delivery was fulfilled by institutional sector. The performance of the institutional credit agencies has to be judged not only by the volume of credit advanced for agriculture development but also by their capacity to meet the challenge of reaching out to the small and marginal farmers, agricultural labor, rural poor people and other members of the weaker section of the community. It has been found that small farmers have been handicapped for want of access to cooperatives, credit. The credit flow of agriculture development bank and commercial bank are also attracted to the large farmers and only elite group take advantage from these government institutions.
2. Non- institutional (Unorganized Source)
The main suppliers of non institutional agricultural credit are money lender, traders; commission agents land lord and relatives. Village money lenders and individuals (Sahuji’s) are the non-institutional sources of agriculture credit. According to rural credit survey in 2001, about 80% of the rural indebted borrowed from non institutional sources. Principal informal sources are:
- Village money lenders
- Landowners
- Friends and relatives
- Merchants and traders etc.
Private borrowing 1. Village money lenders
They constitute the largest source of agricultural credit. Farmers have traditional and ancestral relation with them. Rates of interest charges by them are very high. Since, the loans can not be paid back; these are often inherited and take the form of ancestral debt. Farmers prefer to approach them, because they are used to do so. They hesitate to go beyond because of illiteracy.
2. Land owners
Land owners are the masters of farmers. Since they are paid rent on their land, farmers have good relation with them. It is quite easy for farmers to approach landowners. Loans are provided against movable and immovable property on short, medium and long term. Rates of interest are high.
3. Friends and relatives
Friends and relatives are usually the sources of small amounts of credit. It enables borrowers to tide over immediate requirements. Since the amounts are usually paid back after some days, no security is required and no interest is charged. The amounts are provided in good faith.
4. Merchants and traders
Merchants and traders provide loans to farmers with business motive. Farmers borrow from them usually during cropping season to finance cropping operations. Farmers are provided loans by merchants and traders usually on the condition that the output will be sold to them after harvesting. The price of product is already agreed i. e. at the time of cropping. Interest rate charged by them is very high.
Loans are obtained from these unorganized sources against the security of immovable property on long term and medium term and against the security of movable property on short term. Lack of uniformity in the provisions and conditions of credit is common in the un-organized source. The interest rate varies from 10 percent to 150 percent per annum. The creditors have to suffer much more and they are unjustifiably treated by their masters, which is the main reason for rural indebtedness.
Features of Non- institutional:
- They have no permission from government.
- Credit is provided for whatever the motive is.
- Unequal rate of interest.
- No defined process for getting loans.
- They adopt flexible attitudes.
- High rate of interest.
The rural poor people are compelled to borrow money from the non institutional sources. Due to the lack of institutional agency in the rural area, besides this long legal process to get credit. The major causes for the greater dependency on non institutional sources can be listed bellows
· Urgent need of credit for the social and cultural practices such as marriage, and death.
· Easy to get loan.
· Secrecy from the relatives.
· Problem of collateral.
· Problem in legal process.
4.3 Agencies involved in credit delivery system
A) Institutional source
1. Agriculture Development Bank (ADB/N)
Established about 3 decade ago, Agriculture Development Bank has proved to be the major institutional source of agricultural credit in Nepal
2. Grameen Bikash Bank (GBB) or Rural Development Bank (RDB)
Grameen Bikash Banks was established in five development regions to ensure steady flow of credit and to accelerate rural development during Eighth Plan period. They are the sources for capital and managing credits for rural development. Profit making GBB are underway of gradual privatization.
3. Commercial Banks and Development Banks
Under the priority sector purpose commercial sectors are required to undertake agricultural financing. There is large number of Commercial Banks established after adopting the liberalization in banking sector after 2040 B.S. This process was further accelerated after the amendment of Development Banks Act in 1995.
4. Co-operative Societies
Farmers who require credit for financing farming operations voluntarily organize themselves into agricultural credit co-operatives to obtain assistance from their common pool of resource. There are more than 10,000 Primary Co-operative Societies (PCS). District Co-operative Union (DCU) in the district level and National Co-operative Union (NCU) in the national level provide necessary guidance and supervision to operate micro credit and small saving through the coordination of those institutions in the rural areas.
5. Non-Government Organizations (NGO)
Different Non-Government Organizations working under the motive of rural development and poverty alleviation have also focused their effort on rural credit by forming small groups.
Statistical Summary 1
Status of Agriculture and Rural credit flow during the Ninth Plan
S.N. | Particulars | Amount (In Million) |
1 | Agriculture Development Bank | 34,090 |
2 | Grameen Bikash Bank | 8,170 |
3 | Co-operatives and NGO’s (Through Rural Self reliance Fund) | 107.7 |
4 | Commercial Banks and other financial institutions | 10,800 |
Total 53,167.7 | ||
Source: Tenth Plan (2002-07)
Statistical Summary 2
Projection of Agriculture and Rural credit in the Tenth Plan
S.N. | Particulars | Amount (In Million) | Percentage | |
1 | Agriculture Development Bank | 53,152 | 52.8 | |
2 | Grameen Bikash Bank | 11,900 | 11.8 | |
3 | Co-operatives and NGO’s (Through Rural Self reliance Fund) | 11,900 | 11.8 | |
4 | Commercial Banks and other financial institutions | 23,800 | 23.6 | |
Total | 100752 | 100 | ||
Source: Tenth Plan (2002-07)
Thus, from the above table it is clear that in the Tenth Plan it is estimated that a total of 1.75 billion rupees shall be invested in agriculture and rural credit from the institutional sources. The increasing role of co-operative sector in credit delivery is significant.
4.4 Rural Indebtedness
Rural indebtedness refers to the debt taken by the rural people in order to meet their consumption and non consumption needs. Due to his small and marginal holdings and look of subsidiary occupation, Nepalese agriculturist is proverbially indebted. There are a famous saying “the Nepalese farmer is born in debt live in debt, and die in debt. The nepali people are very usual in debt there is well known saying in Sanskrit which is very usual in Nepalese peoples habit which is as “yen jiwet sukham jibet rinam kritwa ghritam piwet”
The problem of rural indebtedness is very serious in Nepal
Nepal Living Standard Survey 2003/04 shows that 69 percent of households are involved in loan taking while 67 percent have outstanding loans. The incidence of loan taking is higher in rural areas and among households from lower consumption quintiles. For instance, 77 percent of households from the poorest quintiles are involved in borrowing of loans while this figure is 53 percent for the richest quintile.
Statistical Summary 3
S.N. | Description | NLSS 1995/96 | NLSS 2003/04 |
1 | Percentage of households borrowing loans | 61.3 | 68.8 |
2 | Households having outstanding loans | 58.4 | 66.7 |
3 | Average number of all loans | 1.6 | 1.6 |
4 | Average number of outstanding loans | 1.5 | 1.6 |
5 | Percentage of household loans from bank | 16.1 | 15.1 |
6 | Households loans from money lenders | 39.7 | 26.0 |
7 | Households loans from relatives | 40.8 | 54.5 |
8 | Households loans for business or farm work | 28.7 | 24.2 |
9 | Households loans for household consumption | 49.4 | 46.5 |
10 | Households loans with land/house as collateral | 16.8 | 14.1 |
11 | Households loans without collateral | 74.7 | 75.1 |
Above table shows that, average number of loans per household stayed constant at 1.6 in 1995/96 and 2003/04. Of all loans, the percentage borrowed from banks has decreased from 16 to 15 and that from money lenders has decreased from 40 to 26, and from relatives increased from 41 to 55.
By purpose of loans, the proportion for business or farm use and that for household consumption have decreased from 29 to 24 percent and from 49 to 47 percent respectively. Similarly, the proportion of loans with land/ house collateral has decreased marginally across two rounds of NLSS.
Collateral for loans
Loan can be issued either with or without any collateral. 75 percent of all household loans in the country are borrowed without collateral and 25 percent with collateral. However, 72 percent of loans borrowed from banks are collateralized.
Distribution of collateral type,
Land / house -14 %
Others - 9 %
Property - 2 %
23 percent of loans borrowed by richer quintiles have land/house as collateral. On the other hand, 80 percent of loans borrowed by poorer quintiles tend to be not collateralized at all.
Average amount of loan
Average amount per loan is estimated by dividing total amount of loans by total number of loans, while per household with positive amount is derived by dividing total amount of loans by total number of borrower households and per capita loan amount is calculated by dividing total amount of loan by total number of people in the country.
i.e.
Total amount of loans
Average amount per loan = Total number of loans
Total amount of loans
Per household with positive amount = Total number of borrower households
Total amount of loans
Per Capita loan = Total number of people in the country
Statistical Summary 4
Description | Amount (Rs.) |
Average amount Per loan | 33,891 |
Per household with positive amount | 55,427 |
Per capita loan | 7,225 |
Table 4 summarizes the average amount of loan borrowed in the country. The average amount per loan is Rs. 33,891, average per household with positive amount is Rs. 55,427 and per capita amount for all population is Rs. 7,225 in nominal terms.
Statistical Summary 5
Average amount of loan borrowed
Development Region | Per capita loan (Rs.) |
Eastern | 8,185 |
Central | 8,004 |
Western | 7,881 |
Mid-western | 3,827 |
Far-western | 4,129 |
Ecological zone | Per capita loan (Rs.) |
Mountain | 3,789 |
Hills | 7,234 |
Terai | 7,698 |
Urban | 16,787 |
Rural | 5,533 |
Consumption Quintile | Per capita loan (Rs.) |
Poorest | 1,573 |
Second | 2,737 |
Third | 4,274 |
Fourth | 6,637 |
Richest | 20,910 |
7,225 | |
Causes of rural indebtedness
- Economic reasons
· excessive pressure of population on land,
· absence o f subsidiary occupation,
· uncertainty in agriculture product,
· Population pressure on land,
· Low income,
· Poor farming condition,
· Absence of subsidiary occupation,
· Malnutrition and ill health,
· Excess burden of rent,
· Exorbitant rates of interest,
· Ancestral debt
· lack of market,
· lack of price support policies and subsidy in input.)
- social reasons
- improvident expenditure,
- un productive loans.
- Ancestral debt.
Measures taken to solve the problem of rural indebtedness
· Co-operative farming
· modernization in agriculture sector (Irrigation facilities, Improved technology, high breade seeds.)
· Institutional credit facility
· Controlled and competitive role of village money lenders
· Debt liquidation
· Marketing arrangements
· Land reform
· Social awakening
· Development of non agriculture sector
4.6 Requisites of agricultural credit system
Credit is crucial for agricultural production and should become more accessible to large and small farmers. Priority should be given to foster a more dynamic and elastic policy of agricultural credit (more loans to more farmers for seasonal credit and more fund earmarked for long term credit) in which small farmers with limited collateral could be included.ADB/N, GBB and similar credit institutions jointly with the commercial banks should be used to expand credit facilities to the agricultural sector. In this way, farmers could finance structural improvements for higher productivity of their land (land consolidation, tube wells, mechanization etc.) as well as improvements in their farming practices (use of small implements and improved inputs).
In addition, credit services will need to be part of overall financial services, including saving facilities, in order to be sustainable in the long run. At the moment, capital for on-lending from external donors’ serves as an effective subsidy to the suppliers of credit and often as a disincentive for the development of sustainable banking practices. In order to ensure that credit delivery is sustainable in the absence of external support, the cost of providing credit to the borrower should reflect the full cost of its delivery.
Increased emphasis should be given in helping the poorest farmers i.e. the small and marginal farmers and protecting them from negative effect of liberalization. With the present privatization policy of the HMG/N, government’s new role is carefully conceived with attention to its responsibilities to ensure that the poor farmers are not marginalized further. To support marginal group of farmer’s credit in kind system is also in recent practice by some Non Government Organizations. Such a practice has provided good experience of rural credit delivery system.requisites of agriculture credit are as follows
· citizenship of nepal.
· Security/ legal asset.
· Authorised person.
· Supprtee name.
· Project proposal and monitoring report.
· Responsibilty
· Industry registered paper.
4.6 Agriculture and Rural Credit an analytical study of tenth plan.
4.6.1 Background
Agriculture and Rural Credit play very important role in poverty alleviation and in the
Creation of employment in the villages by promoting agricultural and other business.
There have been enough achievements as targeted from the agricultural and rural credit programs. Lack of easy access to receive loan, inadequate institutional Expansion, lack of security, excessive indirect expenditure to receive loan and high interest loan have been observed as the obstacles in the development of this sector. To create opportunities for income generation activities and employment by removing these obstacles it is necessary to make agricultural and rural credit system easily accessible to the general public.
.
4.6.2 Existing Problems
There is still a lack of coordination in the issuance of agricultural and rural credit due to failure in institutional efforts in integrated and coordinated implementation of programs during the Ninth Plan. Although there has been rise in the number of banks and financial institutions, the present institutional mechanism is not adequate to reach the loans to the targeted groups. The relocation of branches of Nepal Bank Ltd, Rastriya Banijya Bank and Agricultural Development Bank during the latter years due to the deteriorating law and order situation has an adverse effect in the issuance of loans in the village areas. It has been felt that the spread rate is high in the overall financial system. The gap in spread rate is high in agriculture and rural credit. As such, receiving appreciable results from the investment became a challenge. Although commercial banks had to channel certain part of the fund towards the priority area and to the deprived section of the people it was not implemented seriously. Due to lack of effective monitoring and supervision the loan repayment of the banks and financial institutions has not been satisfactory. There has been effect on targeted issuance of agricultural loan due to the non implementation of the package program as envisioned in the Agricultural Perspective Plan. There has been expanded use of different materials which help in the rise of agricultural productivity. In the use of shallow tube wells that play a very important role in groundwater irrigation system, there has not been rise due to anomalies in the policy and lack of budget. The transaction in rural and agriculture credit has not yet been adequately simplified. There has not been effective mechanism to monitor the flow of credit. Only 13.5 percent of credit from all the banking and financial institutions ha d been used in agricultural and micro- enterprises during the plan period. Due to the lack of coordination between rural credit institutions and other institutions the duplication could not yet been avoided. Although there has been some progress on livestock insurance as per the agreement with credit deposit insurance and credit Guarantee Corporation, the task of crop insurance has not yet been initiated.
4.6.3 Tenth Plan
a) Objectives
1) Mobilization agricultural and rural credit in an integrated manner to help rise in gross domestic product by increasing the agricultural productivity
2) The outreach of micro credit is to be increased to check the rampant rural poverty by involving maximum number of deprived people in production
215 oriented and income generating micro enterprise.
b) Strategy
Agriculture and rural credit play a very important role in alleviating poverty by Increasing economic activities and opportunities for income generation and employment in the rural area. As majority of the farmers are small farmers the micro credit has a special importance on it. Although various institutions have been involved in availing the credit for agriculture and rural development programs, the coordination in the implementation process has not been effective. Despite the demand of credit, the flow of the same has not been enough especially to the small farmers and deprived people. The entrepreneurs have not been taking initiative for not being able to get guarantee of the credit availability. Collateral has been a problem in the credit availability for the deprived people. The targeted programs have been seen as an attraction in solving such problems. Since the social aspects too are involved in the programs related with rural micro credit they can provide valuable support in
development and increment of social consciousness. In this context, the major strategies in this sector have been formulated as following.
Objective No.1 related strategies
1. All the banks and financial institutions involved in agriculture and rural credit shall be mobilized through a single coordination system by formulating a policy to avail institutional credit of alleviating the rampant rural poverty.
2. Agriculture Development Bank shall be mobilized as the main institution to meet the required of agricultural credit in the rural area. Commercial banks and other development banks too shall be mobilized to avail the institutional agricultural credit. Such type of credits will be short, medium and long term in nature.
3. Income and employment shall be raised by involving women and unemployed rural youths in productive credit.
4. Regular monitoring shall be done to evaluate the target and progress of agriculture and rural credit. Nepal Rastra Bank shall be mobilized as the main body in these aspects.
5. Since the resources from existing bank and financial institutions are not enough to meet the excessive demands of agriculture and rural credit, a long term fund shall be mobilized in Nepal Rastra Bank in the form Rural Self-Reliance Fund.
Objective No.2 related strategies
6. To increase the outreach of micro-credit to the deprived people there shall be improvement in the institutional mechanism to expand the credit flow as much as possible through the micro finance institutions in the rural area. 216
7. The policy to gradually handover the ownership of Rural Development Bank which is in Break Even Point (BEP) or in better position to the private sector shall be adopted. This process shall be initiated in western rural development banks and gradually applied in the other parts. The policy to provide first priority to deprived women debtors shall be followed while privatizing the banks.
c) Policy and Work Plan
Agriculture and rural credit Flow through Single Coordination System
(Related with No.1 Strategy)
Agriculture and Rural Credit shall be developed as one of the main some for poverty alleviation.
Realizing the necessity of agriculture and rural credit, "Agriculture and
Rural Credit Flow Program" will be initiated through a single Coordination system by involving commercial banks, development banks
and other financial institutions and their ongoing investment resources in
a co-ordinated manner .
Mobilization of ADB as the main source for the agricultural and rural credits (Related with no.2 strategy)
The compulsory investment by commercial banks in the priority sector lending System (12 percent of the total credit) in agriculture, cottage industry and service oriented enterprises shall be gradually reduced by the second year of the Tenth Plan and completely removed by the end of the plan Agriculture Development Bank shall be strengthened as the main institution to flow the agriculture and rural credit.
Increased access of the deprived people in the micro-credit (Related with
No. 3 Strategy)
The deprived population will be encouraged to take income and employment generating activities, and their access to micro-credits will be enhanced.
The credit of rural development banks which have been made available to the deprived women in the past in different income generating activities shall be further expanded.
Small Farmer Cooperative (SCFLs), saving and Credit Cooperatives (SACCOPs) and Financial Intermediary NGOs /INGOs along with the existing rural development bank shall be mobilized extensively to increase the access of micro-credit to rural areas. Moreover, the collective insurance of micro- credit at the farmer’s level shall be gradually expanded.
217
To increase the access of institutional credit in the rural areas the Institutional system of bulk credit shall be strengthened. The institutional system to supply bulk credit to rural development bank and other financial institutions which work in the micro-credit shall be strengthened during the plan period. For this finance shall be made available through Rural Micro Finance Development Centre Ltd-(RMDC) and other sources.
The existing limit of 3 percent credit to the deprived groups by the commercial banks will be maintained and the areas within this sector will be reformed as per the need.
The policy to encourage institutional presence in micro credit shall be adopted. The current permit system enforced by the Nepal Rastra Bank shall be simplified after the review in order to encourage private sector and individuals who would like to work in the area of micro credit.
In the present context of minimum presence of commercial banks in the rural areas the institutions working as financial intermediaries and saving and credit cooperative bodies shall be allowed to work as the agents of the commercial banks.
Privatization of Rural Development Banks (Related with no.4 Strategy)
The service of rural development bank in the hilly areas shall be expanded. In this context, there shall be necessary reforms in the current rural banking system prevalent in terai. The rural development banks operating in breakeven or better shall be gradually handed over to the private sector. This process will be initiated through the western rural development bank by giving priority to the deprived women debtors of the bank.
Mobilization of Nepal Rastra Bank as main monitor in agriculture and rural credit (Related with no. 5 strategy)
Continuing the five year structural reform programs initiated by Nepal Rastra Bank during the plan period the rural development bank under the NRB shall be operated according to the productivity standard set by the high level coordination committee.
There shall be a system of control and regular monitoring of the savings and credit cooperative institutions which have been directly helping in the rural credit. Nepal Federation of Saving and Credit of Cooperative Unions (NEFSCCOU) and central level institutions of National
Cooperative Federation shall be mobilized for this purpose.
Loans to educated unemployed youths through project as collateral
(Related with no. 6 strategy)
218
Credit programmes based on education certificate and projects as collateral will be mobilized for the unemployed agricultural graduates and technicians and unemployed rural youths to employ them in productive and income generating enterprises unemployed youth who have received skill oriented training shall be issued loans on project collateral to set up micro enterprises.
The loan scheme initiated by the commercial banks to rural and deprived youths who strive for foreign employment and to the people from the Maoist insurgency affected area shall be given continuity. The policy to regard such loans as loans handed out to the deprived people shall be maintained.
Guarantee to Credit investment through Investment Fund (Related to no.7 strategy)
Institution working in micro-enterprises through Rural Self Reliance Fund, Rural Saving and Cooperatives, intermediary institutions and the investment of ADB such as in tea and fruits will get medium and long term credit as and when needed. The fund shall receive a fixed amount from His Majesty's Government and the Nepal Rastra Bank on annual basis. Moreover, the fixed amount which should have been invested by commercial bank and financial institutions in agriculture and rural credit shall be deposited in the fund if the same is not issued as loans.
4.6.4 Programs
1. The total need of credit in agriculture and rural sector shall be fulfilled at the rate of 52.76 percent from Agriculture Development Bank, 23.62 percent from commercial banks and related institutions, 11.81 percent from rural development banks, and rest 11.81 percent from institutions working in micro-financings and other institutions (Loan projection is on table 12.1)
2. The loans to be issued to the deprived sector by commercial banks maintained at the current level (3 percent of the total loans). Loans up to
Rs.100 thousand issued through the Commercial banks to anyone going abroad for employment shall be included in this scheme itself and monitoring shall be done accordingly.
3. In case of the banks and financial institutions (except those involved in the micro credit) which do not have branch network in the rural areas provision shall be made for direct financing and indirect financing with a view to involve them in the scheme. The fixed amount of financing to be borne by such development banks and financial institutions can be done through rural development banks, saving and credit cooperative institutions and through micro finance institution which have been licensed to work as financial intermediaries. The share capital of commercial banks and
219 financial companies shall be deemed as part of the loans under the scheme.
4. The social mobilization cost needed for the activities related with micro credit to the governmental and private sector institutions which do not mobilize deposits, arrangements will be made to provide lump-sum amount in the annual basis through the poverty alleviation fund. This provision shall be executed as per the recommendation of the high level coordination and direction committee for the rural development bank of the central bank
.
5. Various agriculture and rural credit programs, micro-credit programs, educational, social, health, community and public awareness oriented programs of different institutions of the government shall be operated from one window as far as possible for coordination. Arrangement will be made for necessary coordination from the poverty alleviation fund.
6. Apart from the policy provision under the agriculture and rural credit programs the concerned cell of the Nepal Rastra Bank shall be mobilized to conduct regular monitoring, evaluation and study. A high level agriculture and rural credit policy making committee under the coordination of the central bank shall be formed at the outset of the Tenth Plan with the representation from ministry like Agriculture, Industry, Finance and agencies like National Planning Commission, Agriculture Development Bank, Nepal Bankers' Association, Nepal Financial Institutions Association and at the most two representatives from other related agencies for the policy decisions conducting needed studies and ensure that coordination. The Secretariat shall be at the central bank. The committee shall also decide on the scope of agriculture and rural credit.
7. Under the Community Ground Water Irrigation Sector Project (CGISP) financed by the Asian Development Bank, credit will be made available from NRB for self reliance fund and for deprived and marginal farmers in the 12 Terai districts of eastern and central development region in collective guarantee without collateral for 10,000 shallow tube wells through partner financial institutions (PFIs). It is expected to irrigate about 40,000 hectares of land and serve about one thousand deprived and marginalized farmers as beneficiaries.
8. To increase the access of the credit to the weak, deprived and marginalized people of the society, the blind, handicapped persons. The provision of credit amounting to 40,000 rupees shall be continued to fund income generating and employment oriented activities on basis of the project as the guarantee. The flow of the credit from the commercial banks shall be deemed as the loans to the deprived people and as such monitoring shall be done. The loans if issued by other financial institutions, besides the commercial bank, shall also be regarded as the loans under agriculture and rural credit scheme.
9. The institutional development will be made for the collective insurance of
220 the loans issued as micro-credit in the prioritized rural areas to the benefit of the small farmers. The micro-credit institutions shall be encouraged for this purpose.
10. The loan investment under Third Livestock Development Project financed by the Asian Development Bank shall be deemed under agriculture and rural credit scheme throughout the project period (2002/2003 )
11. The loan investment under the program implemented by IFAD supported in poverty alleviation project in western terai (PAPWT) districts shall be deemed as loans under agriculture and rural credit scheme.
12. Since the staff working in financial institutions involved with agriculture and rural credit program need capacity enhancement trainings, the high level agriculture and rural credit assessment committee in the central bank will identify such needs and manage the same. The national training institutes will get a priority to provide the training where national capability exists.
13. To support the poverty alleviation program, the deprived and marginalized farmers will be encouraged to take part in an income generating activity, for which at least one credit per family will be mobilized, that will result an additional coverage of 100 thousand families through credit.
14. The agricultural industries related with the priority commodities of Agricultural Perspective Plan will be encouraged to set up their plants in the rural area long-term credit needed for industries will be provided with normal interest rate through Agriculture Development Bank, commercial banks and financial institutions. Provision shall be made to avail refinancing from the central bank for such loans.
15. The provision of Nepal Rastra Bank Act-2058 concerning the refinancing provision shall be amended to support agriculture and rural credit program.
16. Agriculture Development Bank, commercial banks and rural development banks on the basis of their assessment shall be activated to provide the credit for small, medium and marginal income group of farmers through the provision of total annual production credit on simplified basis to procure fertilizers, seeds, pesticides and agricultural tools needed for then during the plantation period.
17. With a view to enable the farmers to receive suitable price for their products medium sized go downs, cold storages shall be set up as cooperative bodies and the necessary amount of money for the means of transportation such as tractors, bullock carts etc. shall be managed as loans from commercial banks and financial institutions at reasonable interest rates. This will help develop the spirit of cooperative principles.
221 industry and board will be expanded to rural areas and made further effective.
this is the rural development class notes for my lovely students of Dhulikhel Campus
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