Focus on rural areas
There is nothing new in the deputy prime minister’s call for banks and lending agencies to channelise the pool of funds and urban capital to the rural areas. A lot of lip service has been paid by officials of all ranks in highlighting the need to empower the rural population. The Agricultural Development Bank Nepal (ADB-N) has been working for 37 long years, during which it has done quite well in injecting capital in rural areas through several schemes such as micro-credits and micro-financing. In particular, it loaned out about Rs 85 billion and recovered about Rs 65 billion. Though not the best of performance, it still has to be reckoned as significant. As always, the ADB-N was not spared the political appointments and partisan considerations of the day. Few will disagree with Bharat Mohan Adhikari who urged the bank to toe a policy which was the rationale behind the establishment of ADB-N — empowering the rural mass.
Soon after the land reforms were initiated decades ago, there was a need for equipping the people and providing them with the technology and means for optimum yield from the land. The ADB-N was established precisely to meet that particular objective. Now the Bank has a commercial service wing which provides regular banking services and another wing that lends money for micro enterprises, especially farming through the Small Farmer’s Development Programme (SFDP). This programme, modelled on the Grameen Bank of Bangladesh, has been quite a success as testified by the loan recovery rate. But despite the sound banking infrastructure that ADB-N has succeeded in establishing in rural areas (it has 188 offices countrywide), it still lags behind on several economic planks although one has to concede the ADB-N has registered good progress in the last two years. This is particularly notable in the context of the banking climate in rural areas which is far from conducive.
The Bank plans to inject as much as Rs 10 billion this fiscal year with a recovery target of Rs 9 billion. Considering difficult socio-economic and political hurdles, this rate of capital transfer cannot be described as insignificant. But that must be followed by even bigger and effective packages. Meanwhile, the ADB-N, like others, has initiated the process for converting itself into a public company as required by the Bank and Financial Institution Ordinance-2004 that was enacted recently. The Bank’s future now lies in being a public company, for which, a sleeker, swifter and highly reliable structure alone can rub shoulders with others that are now engaged in a cut-throat competition. The ADB-N has to emerge as a dynamic financial institution. The government, therefore, must back up the ADB-N in directing focus on rural areas.