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Handbook on Best Practices

Agri/Rural Finance

Agricultural Credit Department

State Bank of Pakistan
The Team

Name Designation Contact

(92-21) 9217216
Muhammad Ashraf Khan Director

(92-21) 9217241
Kamran Akram Bakhshi Joint Director

(92-21) 2455934
Abdus Saboor Assistant Director

(92-21) 2455934
Agricultural Credit
Syed Ali Raza
The provision of affordable financial services to the rural population has been a prime
component of development strategy for several decades. Governments, development
agencies, and other donors have supported various agri/ rural financial institutions to
accelerate the rate of growth and alleviate poverty, especially in the rural areas.

Financing development in rural areas, where majority of the poor in developing

countries lives, is one of the most pressing concerns of governments. The agri / rural
sector in developing world not only generates employment, income, and foreign
exchange from agriculture and off-farm rural activities, but also provides markets, labor
& raw material inputs to manufacturing and other urban industries. Failure of the agri/
rural sector to grow along with other sectors impedes the overall progress of an

Like many developing countries, agriculture is the backbone of Pakistan’s economy.

Agriculture in Pakistan provides food to consumers and fibre for domestic industry; it
provides livelihood and employment to the majority of the country’s population, and is
the major source, directly and indirectly, of the country’s export earnings.

State Bank of Pakistan, in line with government’s declared priority for agriculture sector,
has been endeavoring for the past so many decades to ensure flow of sufficient, timely
and cost effective funds to agriculture sector. While substantial progress has been made
in this respect, there is still ample room for further improvement. With the expansion in
the size of the agriculture sector, the financing needs of the sector are also increasing
and there are significant opportunities for banks to deploy their funds in such
remunerative avenues. SBP has created a Development Finance group for the
development of banks’ financing in the areas of agriculture, SME, microfinance, and
infrastructure & housing. Further, Development Finance Support Department has been
established at SBP-BSC for the effective implementation of policies/ schemes in the
areas at grass root level. Under restructuring, the role of ACD has been enhanced to
meet farm as well as non farm credit requirements of the people living in rural areas. For
awareness building and research on international best practices vis-à-vis Pakistan’s
experience in agri/rural finance, the Governor, State Bank of Pakistan has desired the
publication of a handbook by the Agricultural Credit Department (ACD). This
Handbook provides an overview of the policies and strategies of some of the successful
institutions in the field of agri/ rural finance and highlights their key achievements in
terms of vast outreach, high rate of recovery, sustainability as well as profitability, and
most importantly the increasing level of confidence of their clients in those institutions
which is depicted in their vertical & horizontal expansion. This Handbook will help
banks to revise and devise their lending strategies to grasp the vast untapped agri/ rural

Table of Contents

1.  Introduction............................................................................................... 1 
2.  Conceptual Framework ........................................................................... 2 
2.1.  Rural Finance......................................................................................... 2 
2.2.  Agriculture Finance............................................................................... 2 
2.3.  Agricultural Microfinance .................................................................... 2 
2.4.  Rural Finance Innovations ................................................................... 2 
2.5.  Best Practices ......................................................................................... 2 
2.6.  Financial Sustainability ........................................................................ 3 
2.7.  Client Outreach ..................................................................................... 3 
3.  Paradigm Shift .......................................................................................... 4 
3.1.  Old Rural Finance Paradigm ............................................................... 4 
3.2.  New Rural Finance Paradigm .............................................................. 5 
3.3.  Value Chain Approach ......................................................................... 5 
4.  Agri/ Rural Finance Institutions in Pakistan ......................................... 6 
4.1.  Historical Background .......................................................................... 6 
4.2.  Importance of Agri/ Rural Finance .................................................... 7 
4.3.  SBP’s Initiatives in Agri/Rural Credit ................................................ 7 
4.4.  Impact of SBP’s Initiatives ................................................................... 8 
4.5.  Constraints Issues in Agri/rural Financing ........................................ 8 
4.6.  Future Outlook ...................................................................................... 9 
5.  International Best Practices................................................................... 10 
5.1.  Bank for Agriculture and Agricultural Cooperatives (BAAC),
Thailand ......................................................................................................... 10 
5.2.  Land Bank of the Philippines ............................................................. 14 
5.3.  Bank Rakyat Indonesia ....................................................................... 17 
5.4.  Grameen Bank, Bangladesh ............................................................... 20 
5.5.  BANRURAL S.A. Guatemala ............................................................ 23 
5.6.  ACLEDA Bank, Cambodia ................................................................ 25 
6.  Conclusion ............................................................................................... 28 
7.  Summary of Operating Methods, Performance, etc. of Financial
Institutions ..................................................................................................... 30 

ABL Allied Bank Limited

ACD Agricultural Credit Department
ADB Asian Development Bank
BAAC Bank for Agriculture & Agricultural Cooperatives
BRI Bank Rakyat Indonesia
FAO Food & Agriculture Organization
FBC Federal Bank for Cooperatives
GB Grameen Bank
HBL Habib Bank Limited
MCB MCB Bank Limited
MFIs Micro Finance Institutions
MINFAL Ministry of Food, Agriculture & Livestock
NBP National Bank of Pakistan
PPCBL Punjab Provincial Cooperative Bank Limited
RF Rural Finance
RFIs Rural Finance Institutions
SBP State Bank of Pakistan
SMEs Small and Medium Enterprises
UBL United Bank Limited
WB World Bank
ZTBL Zarai Taraqiati Bank Limited
Handbook on Best Practices in Agri/ Rural Finance

1. Introduction
Notwithstanding a worldwide recognition of regarding international best practices in
the fundamental importance of rural sector agri/ rural finance. Therefore, for capacity
in an economy, the state of rural financial building of financial institutions, this
markets in developing countries is Handbook has been prepared comprising
characterized by low and decreasing of some very important lessons that have
availability of financing for both agricultural been learnt from the experiences of
and non-agricultural activities. In different financial institutions, which can
developing countries and transitional provide such useful guidelines to banks
economies, only a very few rural masses that could help them adopt agri/ rural
have access to financial services. Rural finance as a viable business line.
areas are often characterized by a paucity of
viable financial institutions and lack of The information has been taken from
variety of financial services available. Rural various publications of World Bank, FAO,
communities often do not have access to ADB, and other International
saving options, credit services, insurance, or Organizations in addition to websites of
transaction services. Besides, limited access financial institutions. The Handbook
to long-term financing needed for examines the lessons from best practices in
agriculture, land improvement and other agri/ rural finance. It identifies recent
rural activities is also a hindering factor in advances, current issues, major gaps,
the improvement of agri/rural sector. With challenges, opportunities and efforts to
these odd features, the agri/rural sector expand and strengthen banks’ financing to
presents a real challenge to the design of rural community. It is hoped that it will
sustainable financial intermediaries. help and enable banks working in
Pakistan to improve the services and
Since the emergence of financial inclusion products they offer to rural clients in the
as an effective tool for sustained country.
economic growth, social stability and
poverty reduction, it has become The Handbook is divided into six sections.
imperative to devise a result oriented After Introduction, the second section
agri/rural finance strategy in developing briefly describes the terminologies of
economies. With the aim in mind, State agri/rural finance. Section three elaborates
Bank of Pakistan is striving to develop a different paradigms and emerging policy
sound and sustainable agri/ rural financial framework in rural finance. The fourth
sector in the country. It stands to reason section provides an overview of Pakistan’s
that SBP has taken many initiatives to agri. financing structure, issues and
create an enabling environment for banks constraints in enhancing agricultural credit
to adopt agri/ rural credit as a viable through financial sector, followed by the
business line. These initiatives have fifth section, describing successful practices
resulted in substantial increase in agri. of financial institutions in agri/ rural
credit in the last 6-7 years; however, finance. Conclusion has been drawn at the
outreach remained almost stagnant. This end comprising of summary of key learnings
appears to be only one manifestation of from the financial institutions, which can
banks’ reliance on traditional lending benefit the banks likely to go in a big way in
approaches and their lack of awareness agri/rural finance in the country.

Handbook on Best Practices in Agri/ Rural Finance

2. Conceptual Framework
There has been a tendency among 2.3. Agricultural
researchers and practitioners to
interchangeably use the terms rural finance,
agriculture finance and microfinance. Microfinance is the provision of financial
Nevertheless, there is an agreement on the services for poor and low income people
term ‘rural finance’ as covering the broad and also covers the lower ends of both rural
range of financial services to the rural and agriculture finance. It includes financing
masses i.e. the finance is not limited to both in rural and urban areas. Consistent
credit only. The range of services includes with these operational distinctions,
the following: agricultural microfinance can be defined as
referring to the overlap of agriculture
• Intermediation, which involves finance and microfinance dedicated to
mobilizing and transferring of savings providing financial services to poor
from surplus to deficit units. agricultural households.
• Safe, liquid and convenient savings
(deposit) facilities. 2.4. Rural Finance
• Access to credit facilities tailored to Innovations
the needs of rural population. A financial innovation can be defined as
• Systems for effecting payments and something new that resulted from a
transferring remittances as well as deliberate change to an existing financial
general insurance cover against product, process or delivery system. The
variability in output, price and market innovation can take the form of a new
uncertainties. financial product or financial service
(product innovation), a new process or
In this book, the following operational methodology (process innovation) or a new
distinctions of various terms used, have organizational form or structure of delivery
been adopted: system (system or institutional innovations).

2.1. Rural Finance The innovation is understood to have

Rural finance, as defined by the World Bank occurred or have operated within a
(WB Report-2004), includes a range of particular context or environment. The
financial services such as savings, credit, particular relevant context may be at macro
payments and insurance to rural individuals, (national level) or meso level (at the
households, and enterprises, both farm and immediate environment, e.g. communities
non-farm, on a sustainable basis. It includes where the organization operates). A
financing for agriculture and agro- particular innovation needs to be
processing/ agribusiness. contextualized under these particular
enabling conditions (or constraints) in which
2.2. Agriculture Finance it operates.
Agriculture finance is defined as a subset of
rural finance dedicated to financing for
2.5. Best Practices
agricultural related activities viz. input An innovation is considered a “good
supply, production, processing, and practice” if such innovation has produced
marketing. positive outcomes in terms of financial
sustainability and improved client outreach.
“Best practice” on the other hand is

Handbook on Best Practices in Agri/ Rural Finance

understood as the outstanding practice in the measures in this regard are; sustainability of
particular process or function, i.e. producing operations, and sustainability of fund base.
the best results, among those in the same
industry. 2.7. Client Outreach
Client outreach would include either or both
2.6. Financial Sustainability “breadth” (number of rural clients serviced)
Financial sustainability means that the or “depth” (how poor the clients were that
organization is able to continue the financial are being serviced).
services on a long term basis. Two core

Handbook on Best Practices in Agri/ Rural Finance

3. Paradigm Shift
Several paradigms and policies have been development, promote small farmers,
used in developing countries to address the reduce poverty, and ensure cheap food
difficult and costly problems of providing supplies to urban areas. This approach was
financial services in rural areas. The old invariably supported by multilateral and
rural finance (RF) paradigm dates back to bilateral donors.
1960s and 1970s. Based on lessons learnt
from the old paradigm and revised financial This approach helped some developing
systems approach, the new RF paradigm countries, especially in Asia, to improve
emerged in the late 1980s which gained a agricultural yields in the short-term. But
broader consensus in the 1990s. it was not sustainable over the long
term. It was also costly, and failed to
3.1. Old Rural Finance reach the majority of rural households.
As such, it was unable to achieve the
Paradigm intended objectives of increasing rural
Rural Finance got momentum in 1960s and incomes, reducing rural poverty and
1970s all around the world, particularly in stimulating asset formation. The focus
Asia and Latin America. Many rural credit on lending to agriculture sector, for
projects were taken up under public farming purposes only, ignored the
sectors. Since the special costs and risks potential benefits of supporting growth-
were involved in RF that made formal intensive investments in rural areas
financial institutions reluctant to extend & which would be more appropriate for
expand credit facilities in rural areas, the rural poor or small non-farm rural
therefore, governments and donors were enterprises/ activities.
urged to intervene in rural financial
markets. Following types of interventions Subsidized interest rates did not cover the
were advocated by the researchers/ costs, as such rural financial institutions
practitioners under this paradigm: (RFIs) became unviable and they lost the
confidence of depositors. There was a
• lending quotas on banks and other
huge build up of non-performing loans
financial institutions,
since cheap credit encouraged
• refinance schemes,
unprofitable investments and led to a
• loans at preferential interest rates, concentration of loan portfolios in hands
• credit guarantees, of the rich and powerful. Subsidized
• targeted lending by development agricultural credit often resulted in
finance institutions (DFIs) production inefficiencies by targeting the
These targeted RF programs were expected wrong products and creating artificial
to promote agricultural development. The preference for capital-intensive
interventions were intended to increase investments that “crowded out” abundant
rural lending by reducing costs and risks to labor in rural areas. In some cases
lenders that made loans preferable to rural borrowers intentionally defaulted because
clients and sectors. Subsidized interest they believed that governments would
rates and loan waivers or write-offs were waive or write-off their loans or not take
also used to reduce the debt burden of action against defaulters in priority
priority-sector borrowers, especially sectors. Financial discipline was
followed by natural calamities such as damaged and intermediaries weakened.
floods, droughts, and periods of low farm Several development finance institutions
prices. Credit was regarded as an important became insolvent and were closed or had
means to speed up agricultural to be reorganized.

Handbook on Best Practices in Agri/ Rural Finance

3.2. New Rural Finance paradigm is based on the principle that a

commercial and market-based approach
Paradigm is most likely to reach large numbers of
After the ill-fate of majority of the RF clients on a sustained basis. It recognizes
programs under the old paradigm, that financial services are part of an
microfinance providers, such as NGOs interactive system of financial
and credit unions emerged in the late infrastructure and social and cultural
1970s. They targeted the unbanked poor, norms. Government has a role to play in
who had been left out by the huge establishing a favorable or “enabling”
investments made in financial market policy environment, infrastructure &
under old paradigm. These microfinance information systems, and supervisory
institutions in fact brought about the structures to facilitate the smooth
revolution by proving that the poor are functioning of rural financial markets, but
bankable, but the customary banking it should play a more limited role in
system had failed to serve them direct interventions.
3.3. Value Chain Approach
Based on the lessons learnt from the old
The value-chain approach is currently
paradigm and the emerging microfinance
emerging as an important tool to study
revolution, the new RF paradigm began
the new production and marketing
to emerge in the late 1980s which gained
relationships that have evolved due to
momentum in the mid 1990s. The new
economic globalization and the
paradigm adopts a financial systems
commercialization of agriculture. The
approach, using market principles to
value-chain approach considers
deliver financial services in rural areas.
economic activities, clusters, and sub-
This system is aimed at facilitating rural
sectors as a continuous chain with value
development that, in turn, will promote
addition at each successive link. It helps
asset creation and poverty reduction. The
analyze the value added at each chain
new paradigm treats finance as a way to
link related to the rural economic
expand and integrate markets, rather than
activities and clusters of activities that
as a policy tool for targeting a specific
convert raw materials into finished
segment of the market. The new RF
products and then market them.

Handbook on Best Practices in Agri/ Rural Finance

4. Agri/ Rural Finance Institutions in

4.1. Historical Background activities and neglected the financing to
co-operative societies. In 1976, with
In Pakistan, agricultural credit market
enactment of Co-operative Banking
consists of formal and informal providers
Ordinance, the “Federal Bank for Co-
of credit. Formal lenders are: specialized
operatives” (FBC) was established to
banks like Zarai Taraqiati Bank Ltd.
finance provincial cooperative banks for
(ZTBL) and Punjab Provincial
further lending to cooperative societies.
Cooperative Bank Ltd. (PPCBL) and
Subsequently, provincial cooperative
commercial banks, while the later
banks were amalgamated to provide
comprises of illegal money lenders,
agricultural credit at grass root level and
friends and relatives, village shopkeepers
to encourage the cooperative societies’
and commission agents, etc. The
structure in the country. However, the
predominant share of credit is provided
system did not achieve its goals due to
by the informal sources of credit in the
default of the provincial cooperative
banks and a number of fake cooperative
societies. Various steps undertaken by the
In order to overcome this inadequacy, two
government over subsequent years failed
specialized institutions i.e. Agricultural
to revive the role of cooperatives in
Development Finance Corporation and
financing the agriculture sector.
the Agricultural Bank were established in
Resultantly, FBC was liquidated in 2001
1950s. Subsequently, these institutions
followed by liquidation of provincial
were merged to form the Agricultural
cooperative banks’ except PPCBL. After
Development Bank of Pakistan (ADBP)
liquation of FBC, financing to PPCBL
in 1961 (Now called ZTBL).
was diverted to SBP under the guarantee
of Punjab Government.
Prior to 1972, commercial banks’ loans
portfolio in agriculture was nominal and
Informal credit market is characterized by
bulk of the credit to this sector was
low transaction costs, very high interest
provided by ADBP. With the
rates and rapid disbursement of credit.
introduction of banking reforms in
Although, its share in total credit has
1972, several institutional and policy
declined, it is still a major source of agri.
changes were made with the objective of
credit in the country. The close familiarity
a more equitable distribution of banks’
of borrowers with informal lenders in
credit among various sectors and groups.
conjunction with coercive loan recovery
Towards the end of 1972, SBP started
methods and the inability of formal
assigning mandatory agricultural credit
institutions to reach to the poor have
targets to five big banks viz. ABL, HBL,
brought about heavy dependency of the
MCB, NBP and UBL with provision for
rural population on the informal markets.
penalizing institutions that do not meet
This trend has continued despite higher
the targets.
interest rates ranging from yearly rates of
50% to 100%. Most informal lenders have
The legislation on Co-operative Credit
limited loan portfolios and operate within
System was introduced in the
the narrow area of their influence.
subcontinent in 1904. At the time of
independence, co-operative banks were
mainly engaged in financing commercial

Handbook on Best Practices in Agri/ Rural Finance

4.2. Importance of Agri/ products for financing to agriculture

Rural Finance • Strategy in place to Expand Agri
Availability of agri/rural credit is a Finance to 3.3 Million Borrowers
prerequisite for enhancing productivity and from the Existing 2 Million
improving standard of living by breaking Borrowers, to Meet 75% of the Credit
the vicious circle of poverty of small Needs (from Existing 45%) in next 3-
farmers. It has been observed that farmers 4 years.
usually utilize the credit facility to meet • To mitigate the risk of losses to
short term credit needs mostly for purchase farmers due to natural calamities and
of inputs. The banks are also interested in risk of nonpayment to banks in such
extending short term credit. The experience cases, Crop Loan Insurance Scheme
of developed economies shows that (CLIS) has been introduced from Rabi
agri/rural credit for investment in the form Crop 2008-09. This scheme will not
of machinery, equipment and infrastructure only safeguard the interests of banks
has played major role in increasing and farmers, but it will also save huge
productivity and future cash flows. amount of funds spent by the
Therefore, banks need to increase the Government of Pakistan in the shape
supply of credit in the form of medium to of frequent write-offs / waivers of
long term investment in the farm and non agri. loans of ZTBL’s borrowers.
farm sector. Farmers can also avail the • Allowed banks to finance against two
opportunity to transform their lands into personal sureties upto 500,000 in
mechanized farming units to reduce cost addition to passbook of the land.
and increase profitability. • Issued Financing Scheme for Small
Farmers on group based lending
4.3. SBP’s Initiatives in methodology whereby members of the
Agri/Rural Credit group can borrow up to Rs 200,000/-
without any collateral from financial
With the liberalization of financial sector,
there was a paradigm shift in the roles of
• Compiled and released district wise
SBP and banks. Under the new paradigm,
data of agri. credit for the first time to
SBP was committed to creating an
facilitate the policy makers.
enabling environment for banks to adopt
agri. / rural finance as a viable business • For effective implementation of SBP’s
line. The major initiatives taken during last initiatives, a separate Development
7-8 years are briefly described as under: - Finance Support Department (DFSD)
and its subsequent units were
established at SBP BSC Offices.
• Inducted 14 Domestic Private Banks
These units would focus on
into Agri Credit Scheme apart from 7
developing a network in collaboration
Banks (5 Major & 2 Specialized)
with local banks and farming
• Guidelines for Livestock, Fisheries,
Poultry and Horticulture Financing
• In order to increase the rural branch
were issued to diversify banks credit
net-work, SBP has made it mandatory
to non-farm sector activities.
for banks to open at least 20% rural
• Introduced three years revolving credit
branches while opening their new
scheme, with one time documentation
and automatic renewal on annual
• To reduce operational / administrative
cleanup of principal plus mark-up for
costs of agri/ rural financing and
production loans to farmers.
increasing outreach of financial
• Issued draft Guidelines for Islamic
services to rural community, SBP has
Agri Finance to facilitate banks to
allowed banks to adopt concepts of
develop their own Shariah compliant
branch-less banking and open sub
Handbook on Best Practices in Agri/ Rural Finance

branches, special booths and service 4.5. Constraints Issues in

centers in remote areas.
• Published Handbook on Agri. Finance
Agri/ Rural Financing
Products of banks for guidance of Notwithstanding, the sharp increase in
banks and other stakeholders. agri. credit disbursement, banks are
• Special Training and Awareness meeting only around 45-50% of the agri.
Programs underway for farmers and credit requirements and the number of
bankers. borrowers are around 2 million out of 6.6
• Updated report for estimation of agri. million farmers in the country. The credit
credit by including 150 additional is highly concentrated in crop sector
items eligible for financing i.e. (production loans), which is around 75%
complete value chain from production of the agri. credit disbursement and there
till export by the farmers/growers. is an uneven geographical distribution
• Rationalized agri. credit data returns with more than 80% of the credit going to
to facilitate banks and other the province of Punjab. Moreover, agri.
stakeholders. credit is only 6% of the credit portfolio of
• Booklets & Brochures of SBP’s banks. As a result, there is lack of
schemes and policies have been ownership and commitment among the
translated & published in Urdu & banks’ management and non-availability
other regional languages of innovative lending products.
• Separate Prudential Regulations for
Banks do not seem keen on accepting
Agri Financing issued.
agri. finance as a viable business due to
intrinsic risks and weird nature of
4.4. Impact of SBP’s agriculture, non-viability of farmers, non-
Initiatives availability of collateral with most of the
The initiatives have paid dividend in the farmers, subsidized credit, frequent
form of robust increase in agri. credit announcement of write-offs & waivers by
disbursements to Rs. 212 billion in FY08 the Government, etc. Besides, the late
from Rs. 39 billion in FY01. The target issuance of pass book and non-
for FY09 has been fixed at Rs. 250 cooperation of revenue authorities with
billion. The number of borrowers has also banks / farmers for creation of charge &
increased to 2 million from 1.3 million. verification of documents of pass books,
and non-availability of one window
With the induction of 14 domestic private operation in Sindh and Baluchistan are
banks into the agricultural credit scheme making access to credit a difficult
in 2002 and the removal of mandatory proposition for banks. There is no
credit targets for five big banks, viz. automation of land record and the existing
Allied Bank Ltd, Habib Bank Ltd, MCB manual system of revenue authorities is
Bank Ltd, National Bank of Pakistan, rather erratic. The ratio of non-performing
United Bank Ltd, from 2005, the share of agri. loans is terribly high due to the
commercial banks has shown significant culture of write-offs/ waivers. In case of
rise in the overall agri. credit defaults, the sale of agri. land for
disbursement. The share of specialized realization of banks’ outstanding loans
banks, viz. ZTBL & PPCBL in agri. almost become impossible for banks. This
credit has declined from 73% in FY01 to sector is also susceptible to risks on
38% in FY07. The trend shows that banks account of natural hazards, unreliable
are continuously surpassing their infrastructure, poor pricing policies,
indicative credit targets, since 2003-04 insufficient & improper marketing
and the actual disbursement in 4 years has mechanism, low quality of seed, low yield
increased by 186% from FY03 to FY07. per acre and lack of coordination among
government agencies which dampen

Handbook on Best Practices in Agri/ Rural Finance

down banks’ interest in expansion of agriculture, livestock, fisheries, etc.

credit to the farming community.
The Government is also investing for the
4.6. Future Outlook development of agriculture sector and
rebuilding the revenue departments
In response to the initiatives taken by
through automation of land record.
SBP to create an enabling environment
Farming community and their
for agri. finance, banks are also in the
representative forums/associations have
process of revamping/restructuring their
also become instrumental in sharing their
agri. financing infrastructure e.g. ZTBL
requirements and issues with the
has planned to open 200 online branches
authorities and banks.
in the rural areas, 5 major banks are
It is hoped that the success stories in the
hiring agri. graduates to strengthen their
following section will facilitate all
field force, domestic private banks are
stakeholders and will ultimately establish
establishing separate agri. credit
a well organized market based agri.
departments and most of the banks are
finance sector in the country.
developing specialized products for

Handbook on Best Practices in Agri/ Rural Finance

5. International Best Practices

During the past two decades several rural through large agricultural cooperatives,
finance institutions (RFIs) have emerged but repayment problems led the bank to
as success stories. They have not only increase its direct lending to individual
achieved the primary objectives of high farmers.
outreach and self-sustainability, but have
also been very helpful in reducing the During the past four decades, BAAC
poverty. In this chapter we will briefly underwent transformation from a
discuss the strategies and achievements of specialized agricultural lending institution
a few top performing RFIs. Among them, to a diversified rural development bank. It
BAAC and Land Bank of Philippines have underwent a gradual process of reforms:
a holistic approach of lending, with
emphasis on agri. finance, while BRI, • 1966-74, laying the foundation for
Grameen, BANRURAL, and ACLEDA individual lending to farmers through
Bank are micro finance institutions with a joint liability groups;
wide array of activities in different
• 1975-87, expanding its lending
operations through access to
5.1. Bank for Agriculture and commercial bank and donor funds and
Agricultural Cooperatives consolidating its operations by
substantially reducing loan channeling
(BAAC), Thailand through cooperatives;
Bank for Agriculture and Agricultural
Cooperatives (BAAC), Thailand is one of • 1988-96, striving for viability and
the biggest names among the most self-reliance, under conditions of
successful agri/ rural finance institutions controlled interest rates, through
(RFIs). BAAC was established under the savings mobilization, improved loan
“Bank for Agriculture and Agricultural recovery and increased staff
Cooperatives Act” in 1966 as a productivity;
government owned bank to stimulate
agriculture by extending financial services • Since 1997, adjusting to prudential
to the agriculture sector. It replaced the regulation by the central bank and
Bank for Cooperatives, whose funding diversifying into non-agricultural
was limited and whose lending activities lending.
were restricted to agricultural
cooperatives. The result of these gradual reforms has
helped the bank in enhancing outreach to
The BAAC enjoys substantial autonomy small farmers. It provides credit access to
in setting its operational and financial 98% of total farmers in Thailand, while
policies. It has focused mainly on lending maintaining the institutional viability.
to borrowers in the low- to medium-
income range. This strategy has been Presently, it has 908 branches and 945
supported by a progressive cross- field offices which cover the entire rural
subsidizing interest rate policy, with area of the country. It is also known to be
higher interest rates charged on larger the largest formal Micro Finance
loans, ceilings placed on loan amounts, Institution (MFI) in Thailand with an
and loans offered to small farmers without outreach of 5.68 million farm households
traditional collateral through joint liability (98.1% of total farm households). The
groups. At first, BAAC lent mostly
Handbook on Best Practices in Agri/ Rural Finance

loan outstanding is 12,245 million US$ as But apart from loan diversification and
on 31-12-2007. Its main source of funds is risk-based loan pricing, BAAC has
the deposits from general public which is operated a unique “unconventional” risk
87.7% of the total operating funds of the contingency system to address loan
bank. delinquency. The system allows re-
structuring of accounts not paid due to
5.1.1. Financing Policy force majeure, principal and/or interest,
up to three times. BAAC may be provided
Since its establishment in 1966, and upto
either a grant or subsidized loan by the
2005, BAAC was only allowed to provide
government to compensate for the loan
loans to Agriculture sector-individual
loss. BAAC is also compensated for the
farmers for their agricultural activities, or
differences in interest rates between what
agricultural cooperatives for onward
BAAC normally charges and the low
lending to their members. From 2006
interest rate offered to farmers as part of
onwards, it has also been allowed by way
rehabilitation program for farmers in cases
of an amendment in its Act, to provide
of large scale natural calamities. In other
loan to non-agriculture sector, but the
words, BAAC has a “built-in insurance
volume of loan to non-farming borrowers
system” that protects itself from
must not exceed 20% of the total loan
“excessive loan loss” that may arise due to
volume at any point of time.
covariant risks (climatic and economic
risks) faced by its agricultural borrowers.
5.1.2. Methodology
Among the lending approaches of BAAC, 5.1.4. Distinctive Features
the most extensively used is retail loans
BAAC has achieved some remarkable
through Joint Liability Groups (JLG).
results in terms of agri/rural finance,
Under this scheme, BAAC extends non-
which are as under:
collateralized loans through groups of
farmers who are made co-liable for each
other’s loan. A typical group has 12 to 15 • Outreach: The most notable
members. In addition to JLG, BAAC also achievement of BAAC is its largest
finance farmers against individual outreach. It provides credit access to
landholdings and may require the deed for 5.68 million farm households (98.1%
“safekeeping” of produce as added loan of total farm households). BAAC has
security. Loan size is set at about 60% of 908 branches and 945 field offices
the projected revenue from sale of the which adequately deal with the needs
crop. of the entire rural community of the
country. More than 80% of its clients
are small farmers.
5.1.3. Risk Management
Strategy • Collateral Free Lending: One of the
Despite being solely concentrated to farm major achievements of BAAC is its
households, BAAC was able to maintain a extension of loan without obtaining
non-performing loan ratio within tangible collateral/ security. Around
manageable level. Starting 1999, BAAC 70% of BAAC loans portfolio is
also began to rationalize its interest rate collateral free based on Joint Liability
policy, adopting a risk-based loan pricing- Group methodology.
that is, pricing interest rates based on
repayment performance classification of Recovery: Recovery rate of the bank is
borrowers, instead of the previous system 95% of the total disbursement. The
where small loans were charged sub- main reason for high recovery rate is
economic price and cross-subsidized for bank’s tight monitoring, follow-up and
larger loans. recovery policies and good risk
Handbook on Best Practices in Agri/ Rural Finance

management systems like funeral (spiritual leaders) to persuade people

funds, insurance, peer pressure under to adopt good habits. It motivates the
joint liability group scheme, etc. The existing or prospective borrowers to
bank keeps close & regular interaction abstain from adopting bad habits or
and also holds meetings with farming involving in unhealthy activities; like
community by way of its field officers. gambling, drinking or any other social
It not only facilitates in the resolution evils.
of community issues relating to
farm/non-farm activities, but it also • Farmers’ Education, Coaching and
keeps track of the cash flows and Training: BAAC aims to be a strong
proper utilization of loans by the financial based rural development
borrowers which help them get bank with modern management to
repayment in time. To keep track of enhance the quality of life of farmers
cash flows, the field officers make and rural entrepreneurs through the
collection/ recovery from the sale provision of financial assistance in the
points of products directly, and for form of loans for agricultural
proper utilization of loans, the loans are production, investment and marketing
generally disbursed in installments, purposes. BAAC has launched a live
with the disbursement of every new radio program called BAAC-Friends
installment depending on the proper & of Farmers which is broadcasted every
optimal utilization of previous week. This 30 minutes program is full
installment. of knowledge and information about
BAAC activities and projects. BAAC
• Sustainability: Over the years, also supports the development of
BAAC has been successfully production and marketing network to
providing the necessary banking & assist farmers and other entrepreneurs
credit services to rural community on at the grass root level. It is a market
sustainable basis. The loan phenomenon that prices are lowest at
outstanding is 12,245 million US$ as the time of harvest and farmers have
on 31-12-2007. Its main source of to suffer in case of forced sale of their
funds is the deposits from general produce. Therefore, to facilitate
public which comes to 87.7% of the farmers from forced sale of produce,
total operating funds of the bank. BAAC provides loans to meet their
financial needs in the meantime. It
• Financing for Rural Development: also coordinates in formulation of
BAAC has played a vital role in rural marketing cooperatives/ committees
development of the country. It not and also provide them financing for
only provides the required agricultural the purpose. It also supports rural
loan to farmers for cropping, but has learning process which strengthens
also promoted non-agricultural communities. BAAC provides
economic activities in rural areas, technological advices to farmers as to
which has been extremely helpful in how they can reduce their cost of
reducing poverty and uplift of rural living & cost of farming, and as to
community. This, in return, has also how they can improve the
attracted more private investment productivity. Loans are not provided
towards rural areas. for activities which have negative
effect on natural resources and
• Character Building: BAAC tries to environment. It promotes clean
inculcate in its clients a respect for farming technology amongst the
moral values. In this regard, it also farmers, and also advise (give signal
obtains the services of Monks to) them about sunset and sunrise
crops / farm products.
Handbook on Best Practices in Agri/ Rural Finance

• Incentives for Regular Borrowers:

In order to encourage borrowers in
regular repayment of their loans,
BAAC has a policy to give discount to
regular / old borrowers on their
previous repayment performance. This
has benefited BAAC not only in
reducing its Non-performing Loans
(NPLs) but also in increasing the
saving of its clients.

Handbook on Best Practices in Agri/ Rural Finance

5.2. Land Bank of the national, provincial, city and municipal

taxes and assessments.
Land Bank being the largest government- In 1977, Land Bank was reorganized and
owned bank is also the fourth largest bank it was divided into three sectors to better
in terms of assets in the Philippines. It is assess the needs of its customers. It was
also one of the biggest government-owned divided into Agrarian, Banking and
or controlled corporations in the Operations sectors to strengthen
Philippines. Land Bank has an extensive operations and ensure long-term viability.
rural branch network. It serves many rural
sector clients in areas where banking is
In 1982, the Agricultural Credit
either limited or is non-existent. Bank’s
Administration (ACA) was also merged
performance has been remarkable and it
with Land Bank. ACA's function was to
has continued to serve a large and diverse
extend credit to small farmers. Land Bank
rural clientele successfully for 45 years.
became the financial intermediary for the
Comprehensive Agrarian Reform Program
5.2.1. History (CARP) in 1988.
Land Bank was established on August 8,
1963 as part of the Agricultural Land 5.2.2. Financing Policy
Reform program, especially to help the
Land Bank of the Philippines was
purchase of agricultural estates for
established with a special focus on serving
division and resale to small landholders
the needs of farmers and fishermen. While
and the purchase of land by the
it provides the services of a universal
agricultural lessee.
bank, it is officially classified as a
"specialized government bank" with a
By 1973, Land Bank was in financial universal banking license.
distress. It lacked the resources and the
capital needed to implement the land
In the last one decade, Land Bank has
reform programs and lacked the structure
focused its efforts on diversifying and
to implement the programs efficiently. On
expanding its loan portfolio within
July 21, 1973 President signed a Decree
identified priority sectors, including
which revitalized the bank. The decree
farmers and fisherfolk, micro and small
granted Land Bank a universal banking
and medium-sized enterprises (SMEs),
license (the first bank in the Philippines to
income-generating projects, commonly
be issued such a license) with a social
known as livelihood projects,
mission to spur countryside development.
agribusiness, agri-infrastructure, and other
The decree expanded Land Bank’s powers
agri-related and environmental
to include lending for agricultural,
conservation projects.
industrial, home-building and home-
financing projects and other productive
enterprises, as well as lending to farmers' To strengthen and expand its credit
cooperatives and associations to facilitate program, Land Bank grants development
production, marketing of crops and assistance to farmers and fisherfolk
acquisition of essential commodities. cooperatives. The Bank provides various
Land Bank was also required by the forms of technical assistance to promote
decree to provide timely and adequate technology transfer and to improve
support in all phases involved in the productivity, product quality, and value-
execution of agrarian reform and also adding operations. The Bank also
increased its authorized capital to 3 billion provides marketing capability-building
pesos. It also became exempted from all assistance to enhance the competence of
bank-assisted cooperatives in preparing
and implementing a marketing plan.
Handbook on Best Practices in Agri/ Rural Finance

Presently, Land Bank is recognized as one of bank-assisted cooperatives in

of the top universal banks in the country - preparing and implementing a
offering a complete range of commercial marketing plan. The aim of the bank is
banking products and services - with solid to support the government’s thrusts of
financial resources to back its operations. poverty alleviation and jobs
In 2007, Land Bank was among the top 5 generation.
Philippine commercial banks.
• Deposit Mobilization: Land Bank is a
5.2.3. Methodology major deposit service provider in rural
areas. Land Bank has almost 180
Land Bank has both retail and wholesale
billion pesos ($3.2 billion) on deposit
lending programs, depending on type of
in just more than 2 million accounts
clientele. It provides retail loans directly
(with foreign currency deposits adding
to individual SMEs and institutional
another 10 percent). Because of Land
borrowers including Local Government
Bank’s role as a government
Units (LGUs) through its own branch
depository, government entities -
network/ field offices located all over the
mainly, local government units -
country. On the other hand, Land Bank
account for about two-thirds of the
also provides loans indirectly to
Bank’s peso deposits. The private
individual small farmers, fisherfolk, and
sector holds the remaining one third of
microenterprises through wholesale loans
to cooperatives and Corporate Financial
• Revenues and Profits: Over the last
The diversification of Land Bank’s loan 14 years i.e. from 1993 to 2006, Land
portfolio catering to a wide array of Bank generated annual gross at
clients has been made possible through modest growth of around 9 percent per
the intensified implementation of varied annum. (
lending facilities and arrangements. The
Bank’s credit facilities vary, depending on • Loan Availability & Access to Small
the type of projects, clients, delivery Borrowers: With the availability of
(wholesale or retail), and source of funds. microfinance services in the rural
Despite the diversity, these programs are areas, small scale borrowers such as
nonetheless deemed consistent with its small farmers and micro-entrepreneurs
key mandate of stimulating countryside were able to easily access loans to
development and targeted to priority finance their micro-enterprises and
sectors with economic activities small businesses. Moreover, it has
converging in rural areas. allowed farm households to diversify,
so as to enable them to raise their
income levels and improve their
5.2.4. Distinctive Features quality of life.
• Capability-Building Assistance
Programs: To strengthen and expand • Simplified Lending Procedures:
its credit program, Land Bank grants There is increased accessibility to
development assistance to farmers and microfinance loans due to minimal
fisher-folk cooperatives. The Bank documentary requirements and
provides various forms of technical simplified lending procedures. Loan
assistance to promote technology borrowers are exempted from
transfer and to improve productivity, submitting the usual documentary
product quality, and value- adding requirements for credit evaluation and
operations. The Bank also provides approval, e.g., audited financial
marketing capability-building statements or statements of income
assistance to enhance the competence and expense which borrowers find
Handbook on Best Practices in Agri/ Rural Finance

hard to comply. Loans are given even Moreover, the market orientation of
without collateral, and loan repayment financial and credit policies, as
is adjusted to the cash flow of the mandated under the Agriculture and
borrower to encourage timely Fisheries Modernization Act of 1997
payment. The incidence of borrowing and a subsequent Executive Order
from formal sources among small (1999), reduced political pressure on
farmers has increased significantly Land Bank to provide subsidized
mainly because of the increased lending itself.
accessibility of microfinance services
in the rural areas. • Portfolio Diversification: Learning
from the experience of the costly
• Zero Tolerance for Loan Defaults: bailouts of Philippine National Bank
A common denominator of successful (PNB) and Development Bank of the
MFIs’ operations is their zero Philippines (DBP), the Land Bank’s
tolerance for loan defaults. This capitalization was increased, and it
ensures borrower discipline and was given free rein to diversify its
sustainability of the MFI. Prior to loan portfolio. Thus, Land Bank has
lending, borrowers undergo social seized opportunities to create new
preparation and are given technical loan products and to develop lending
assistance to assist them in handling programs for LGUs, local housing,
microfinance loans. Furthermore, and rural infrastructure.
MFIs use a variety of lending
mechanisms such as group lending, • Good risk management and internal
individual lending, and market-based audit and control: Land Bank has
incentives to motivate good financial adopted good risk management
discipline among clients and loan practices and internal audit and
officers. Other mechanisms such as controls, as required by the BSP in the
the use of collateral substitutes like wake of the 1997 Asian financial
peer pressure and joint liability as well crisis. To its credit, Land Bank was
as focus on lending to women clients especially serious about these aspects
are key factors in the success of MFIs of effective bank management even
and the Program. before the Asian financial crisis. Its
long association with the donor
• Avoiding behest loans: A community has strengthened this
combination of strong leadership, crucial aspect of Land Bank’s
board structure and its orientation as management and operations because
an agricultural reform bank with a loan covenants with multilateral and
constituency of restive farmers helped bilateral lenders require the presence
shield the Land Bank from corrupt of effective risk management and
politicians using the public bank to internal audit and controls as a
make behest loans. condition for financial assistance.

Handbook on Best Practices in Agri/ Rural Finance

5.3. Bank Rakyat Indonesia subsidies, sustainable interest rates,

efficient management, saving
Bank Rakyat Indonesia (BRI) has
mobilization) which led them to financial
accumulated more than 100 years of
profitability from 1985 onwards. Today,
experience in serving the micro-banking
BRI's microfinance system is the world's
needs of the people. It has over 300
largest and most profitable microfinance
branches and over 4,000 BRI Units and
network in the world. In 1992, BRI
Village Service Centers across the
became a limited liability corporation and
country. With latest technology, BRI has
a public company in 2003.
been able to streamline its nationwide
infrastructure to accommodate the
changing business requirements of agri / 5.3.2. Methodology
rural community. BRI is divided into four Strategic
Business Units: Micro Banking, Retail
BRI is one of the largest commercial Banking, Corporate Banking and
banks in Indonesia, and the most Investment Banking. Its microfinance
profitable and efficient bank. Its services are provided through the Micro
repayment rate has been over 99%. Non- Banking Unit, also known as BRI Unit.
performing loans level is less than 6%,
while for microcredit, it is less than 3 %. BRI has only one micro-loan product,
BRI successfully realized an Initial Public KUPEDES, designed for working capital
Offering and share listing on the 10th or investment purposes. Carefully
November 2003, with shares selected, the borrowers are given loans
oversubscribed by 15.4 times. In 2003, whose amount depends on the borrower's
BRI issued a 10 years subordinated note current income flow and always require
for US$150 million, and a subordinated some form of collateral (a SIMPEDES
bond of Rp. 500 billion. account, land, furniture, motorcycle, etc.).
The minimum amount is Rp.25,000
(US$3), and the maximum is
5.3.1. Brief History Rp.50,000,000 (US$5,000). The minimum
BRI's ancestor, the Priyayi Bank of loan term period is one month and the
Purwokerto, was created in 1895 by maximum is 24 months for working
Raden Wiriamaadya, a Javanese capital loans or 36 months for investment
government official. In 1897, the Dutch loans. Loans can be repaid in monthly,
administration reorganised it as a quarterly or bi-annually installments. The
cooperative bank, following the example interest rate increases by 0.5% if the
of those that appeared in Europe after repayment is not made on time. The
1850. In 1946, it changed its name to repayment rate is very high: 98.34%.
Bank Rakyat Indonesia (BRI) and in 1950
it became a state-owned commercial bank.
The main saving products available are:
At the beginning of the 1970s, 3,600 BRI
Unit Desas (village banks) were created as
• SIMPEDES or Simpanan Pedesaan
part of a government program called
(Village Savings), a deposit
‘BIMAS’, whose aim was to provide
instrument allowing an unlimited
inputs for the rice-green revolution. Those
number of transactions and, therefore,
Units were then used as channelling
favoured by low-income households
agents for different subsidized
that need full liquidity. There is no fee
government lending programs, but all of
to open an account, and except for the
them failed to reach sustainability. In
smallest balances (less than $10), it
1984, the Unit Desas were completely
has a positive real interest rate. Aimed
restructured: each unit became an
at attracting new customers, lotteries
individual profit centre and adopted a
are organized every six months with
commercial approach to microfinance (no
Handbook on Best Practices in Agri/ Rural Finance

prizes in kind. 75.7% of BRI micro- rural economic activity; to replace

banking accounts are SIMPEDES. subsidized credit with positive lending
rates with sufficient spreads to cover all
• SIMASKOT is the equivalent of financial and operational intermediation
SIMPEDES for urban areas with an costs; and to provide a full range of
emphasis on security. financial services (savings as well as
credit) to the rural population. All these
• TABANAS BRI, a government saving objectives were achieved only a few years
program, offers similar features than after the program's inception. Following
SIMPEDES but is not as popular. It are the key features of BRI’s success:
can be explained by the fact that until
a few years ago, no more than two • Effective Management: The
withdrawals per month were allowed management of each unit is extremely
and, moreover, its lottery offers prizes effective. Functioning as individual
in cash whereas most depositors profit centers, their performance is
favour prizes in kind. monitored and specific staff incentives
implemented. In addition, the Units
In order to encourage more clients to open are allowed to move their excess funds
saving accounts, BRI launched bi-annual to BRI branches, where they are well
lotteries for SIMPEDES accounts' holders remunerated, encouraging saving
in 1984. Each saver receives free lottery mobilization in Units.
ticket depending on their minimum
monthly account balances. As the lotteries • Incentive for repayment: Units have
are held in the branches, winners are an excellent repayment rate of over
located within a small area, so most 98%, partly thanks to an incentive
people either won or know someone who system for repayment. Indeed, 25% of
won and it makes these lotteries very the interest paid is repaid to the
popular. borrower when installments are made
in time during the six consecutive
BRI also introduced unlimited months. Also the borrowers, who do
withdrawals for savers in Indonesia after not fail to pay, have had the possibility
field studies showed that a limit was the of being granted bigger loans.
main obstacle preventing people to open
saving accounts in rural banks. Contrary • Savings Mobilization: The emphasis
to what many people feared, the number on savings is another secret of BRI's
of withdrawals did not increase as a result. success: four savings instruments were
It showed that savers didn't want to available from the beginning, each
withdraw more frequently but simply to aiming at different targets, filling a
have the freedom to do so. gap for the poorest households. This
allowed the Units to increase the
Since 2002, BRI started to put online its number of loans and to be more
unit network, with already around 10% sustainable. Deposits went past the
(450) effectively on-line by August, 2004. outstanding loan portfolio in 1989 and
BRI introduced a new facility called the deposit-to-loan ratio is now over
Simpedes Berkartu, or Simpedes with a 225%. The BRI-UD's phenomenal
card in 2004. success in the mobilization of its
savings is a distinguishing
5.3.3. Distinctive Features achievement.
The founding objectives of the BRI-UD
were to replace directed agricultural credit • Sustainability & Profitability: BRI
with broad-based credit for any type of had succeeded in attaining financial

Handbook on Best Practices in Agri/ Rural Finance

sustainability while providing credit their own loan terms with transfer
and savings services to the rural low prices as the ones negotiated with the
income families that previously had management. Loan processing is
no access to formal financial services. quick- taking only about a week for
Moreover, it had achieved new borrowers and less time for repeat
unprecedented level of profitability borrowers.
while providing such services to the
rural poor. The most fundamental • Operations Standards: BRI imposed
policy change in the BRI village rigid standards on its operations. Loan
banking program was the shift from loss provisioning of BRI is higher than
“disbursing credit” to “motivating most state owned banks in other
loan recovery and mobilizing countries, e.g. general loan loss
savings”. provision of 3% (compared to 2% in
other countries), 100% reserves
• Poverty Focus: The BRI-UD is a against loans that are three months and
nationwide network of small village above overdue. As to attaining
banks which target the extremely poor financial sustainability, BRI only took
among Indonesia's rural population. three years to shed off its subsidies.
At the end of September 2004, BRI
had 87% of its loan portfolio in micro, • Wide Network: BRI has the widest
small and medium enterprises, while network in Indonesia with 13
the corporate lending represented the Regional Offices, 324 Domestic
remaining 13%. A large proportion of Branches, 4,049 BRI Units (96% of
BRI’s clients are in the middle and which are profitable), 148 Sub-Branch
upper end of the poor class in Offices and 240 Village Service Posts.
Indonesia. The Income Generating
Program for Small Farmers and
• Full Range of Financial Services in
Fishermen (P4K) is supervised and
Rural Areas: One of the key features
administered by BRI’s branches,
of BRI is its full range of banking
which targets explicitly poor farmers.
services to its clients in rural areas.
Along with lending facility, it accepts
• Autonomy of Village Bank System: deposits – both short term & long term
Key to the operational success is the - from the customers and also provides
autonomy of the village bank system all sorts of remittance services to
to operate as an independent profit general public.
center. Village banks are free to set

Handbook on Best Practices in Agri/ Rural Finance

5.4. Grameen Bank, replication projects in 37 countries around

the globe. Among countries where there
Bangladesh has been considerable replication of the
Bangladesh is one of the poorest countries model are: Philippines, Malaysia, India,
in the world. In 1994, annual per capita and Indonesia. Microfinance in China also
income was US$223, and more than 70 started with a pilot replication project on
percent of the population lived in poverty. the Grameen model.
However, over the past few years,
Bangladesh has shown steady economic David Gibbons (2006), one of the
growth (5-6 %) and its per capita GDP has pioneering replicators in Southeast Asia,
risen to US$ 475 in 2007. cited the following as the ‘essential
Grameen”: (a) exclusive focus on the poor
Most of the population lives in rural areas: with priority on the ‘poorest’ women, (b)
agriculture accounts for around 20 percent financial services delivery that facilitates
of the GDP and more than 60 percent of participation and ensures timely
employment. However, the population is repayment (small loans payable in
growing at a rate of 1.8 (Fig:2008) percent periodic, mostly, weekly installments;
per year, resulting in increasing pressure formation of solidarity groups, self-choice
and decreasing farm size. of loan activities, loans for income
generation only, eligibility of succeeding
Professor Muhammad Yunus started the loans based on repayment of previous
Grameen Bank (GB) as an experimental loans); and (c) attainment of financial
project in 1976 in the village of Jobra. self-sustainability. Gibbons recognized
The project was financed by a commercial that replication is an art and most
bank and was personally guaranteed by replicators adjusted the model to fit
Professor Yunus. In 1983, Grameen was particular local contexts. However, he
established as a specialized financial cited that operational sustainability in
institution under the Grameen Bank poverty density areas and freedom to
Ordinance. The Grameen Bank is not create self-employment are among the
subject to the Banking Companies essential conditions for successful
Ordinance or to any other law related to replication of the model.
financial institutions in Bangladesh, nor is
it subject to interest rate ceilings. It has The new innovation in Grameen is in the
also been partially insulated from other transfer of technology. In the early 1990s
government policies. Lion’s share of the the mode of technology diffusion was
Grameen Bank is owned by members; and “exposure-then-training” – i.e., early
the rest is owned by the government. innovators in one country were sent for
exposure followed by training in
5.4.1. Methodology Bangladesh. These innovators then
Thus far, the Grameen microfinance became the resource institutions in
methodology has been the most popular extending the technology to other
and widely replicated model in Asia with financial institutions in their respective
considerable consistency in attaining countries. The new mode of technology
successful results, particularly in transfer is “Build-Operate-Transfer” that
achieving greater outreach and high has been piloted by Grameen Trust
repayment rate. Grameen Bank, as of (Morshed, 2006). The approach was noted
December 2006, has $475 million in loan to have contributed to the expansion of
outstanding, 6.9 million borrowers from microcredit in the countries where the
74,462 villages and repayment rate of model does not exist and where there are
98.8% (source: very few rural financial institutions. The
The Grameen Trust alone has helped out Grameen Trust reported good results with
their pilot “Build - Operate-Transfer”
Handbook on Best Practices in Agri/ Rural Finance

projects in Turkey, Myanmar, Kosovo and kept outside the banking orbit on the
Zambia over the last nine years. Myanmar ground that they are poor and hence
project, for instance, has reached 95,000 not bankable. Professor Muhammad
clients as of 2006. Yunus, the founder of "Grameen
Bank" and its Managing Director,
5.4.2. Distinctive Features reasoned that if financial resources
can be made available to the poor
• Collateral free Lending: GB people on terms and conditions that
provides credit to the poor of the are appropriate and reasonable, "these
poorest in rural Bangladesh, without millions of small people with their
any collateral. It has reversed millions of small pursuits can add up
conventional banking practice by to create the biggest development
removing the need for collateral and wonder."
created a banking system based on
mutual trust, accountability,
participation and creativity. Because • No Collateral/ Guarantee: Grameen
of the low incomes of GB clients and Bank does not require any collateral
their lack of access to traditional against its micro-loans. Since, the
collateral, lending is done exclusively bank does not wish to take any
through joint liability groups, tied to borrower to the court of law in case of
compulsory savings. The GB has non-repayment; it does not require the
achieved phenomenal success with borrowers to sign any legal
this approach thereby inspiring many instrument. Although each borrower
other countries to copy its efforts. must belong to a five-member group,
the group is not required to give any
guarantee for a loan to its members.
• Owned by the Poor: Grameen Bank
Repayment responsibility solely rests
Project was initiated in the village of
on the individual borrower, while the
Jobra, Bangladesh, in 1976. In 1983 it
group and the centre oversee that
was transformed into a formal bank
everyone behaves in a responsible
under a special law passed for its
way and none gets into repayment
creation. It is owned by the poor
problem. There is no form of joint
borrowers of the bank who are mostly
liability, i.e. group members are not
women. It works exclusively for them.
responsible to pay on behalf of a
Borrowers of Grameen Bank, at
defaulting member.
present, around 94 per cent of the total
equity of the bank. Remaining is
owned by the government. • Outreach: As of March 2008, it has
7.49 million borrowers, 97 percent of
whom are women. With 2,511
• Banking with Poor: From the start, branches, GB provides services in
the bank's main goal has been to 81,752 villages, covering more than
improve the conditions of the rural 97 percent of the total villages in
poor by providing them with access to Bangladesh. Total staff is more than
credit, savings facilities, and some 25,156.
non-financial social programs. Its
focus is on the lowest social strata,
and the income level of its clientele is • Sustainability: By the end of March,
lower than that of the BAAC and the 2008 total deposits in Grameen Bank
BRI-UD. At GB, credit is a cost stood at Tk. 52.45 billion (US$ 764.82
effective weapon to fight poverty and million). Members’ deposit
it serves as a catalyst in the over all constituted 56 per cent of the total
development of socio-economic deposits. Balance of member deposits
conditions of the poor who have been has increased at a monthly average

Handbook on Best Practices in Agri/ Rural Finance

rate of 0.50 percent during the last 12 rate. There are four interest rates for
months. Grameen Bank finances 100 loans from Grameen Bank : 20%
per cent of its outstanding loan from (declining basis) for income
its deposits. Over 56 per cent of its generating loans, 8% for housing
deposits come from bank’s own loans, 5% for student loans, and 0%
borrowers. Deposits amount to 137 (interest-free) loans for Struggling
per cent of the outstanding loans. If Members (beggars). All interests are
we combine both deposits and own simple, calculated on declining
resources it becomes 152 per cent of balance method. This means, if a
loans outstanding. borrower takes an income-generating
loan of say, Tk 1,000, and pays back
• Attractive Rates on Deposits: the entire amount within a year in
Grameen Bank offers very attractive weekly installments, she'll pay a total
rates for deposits. Minimum interest amount of Tk 1,100, i.e. Tk 1,000 as
offered is 8.5 per cent. Maximum rate principal, plus Tk 100 as interest for
is 12 per cent. the year, equivalent to 10% flat rate.

• Exceptional Recovery Rate: Loan • Profit Earning: Ever since Grameen

recovery rate is 98.22 per cent which Bank has come into being, it has made
is remarkable/ tremendous by all profit almost every year except the
means. years 1983, 1991, and 1992.

• Poverty Reduction: According to a

• Low Interest Rates on Loans: recent internal survey, 65 per cent of
Government of Bangladesh has fixed
Grameen borrowers' families have
interest rate for government-run
crossed the poverty line. The
microcredit programs at a flat rate of
remaining families are moving
11%. It amounts to about 22 per cent
steadily towards the poverty line from
at declining basis. Grameen Bank's
interest rate is lower than government

Handbook on Best Practices in Agri/ Rural Finance

5.5. BANRURAL S.A. banking services, preferably directed

towards farmers, merchants, artisans, and
Guatemala small and medium size entrepreneurs. The
BANRURAL is a leading banking behavior of the members of BANRURAL
institution in Guatemala focused on the S.A. is guided by a set of moral values,
rural development of Guatemala by which are constantly reinforced. The bank
providing loans and credits to small and applies a set of principles to manage and
medium size businesses throughout the absorb credit risks. The common elements
largest network in Guatemala of 320 are: an appropriate credit evaluation
offices. BANRURAL is now one of the technology given the operating
top 10 banks in Central America and will environment and constraints; reliance on
continue its growth in the rural areas. portfolio diversification; limits on
agricultural lending; and adequate
5.5.1. History  provisioning.
BANRURAL S.A. was formed in 1998
after transformation of its predecessor, 5.5.4. Distinctive Features
BANDESA which was a government- • Successful Transformation: The
owned development bank founded in 1970 process of transformation and
with the objective to promote and manage privatization of BANDESA into
the credit aid of the Guatemalan BANRURAL S.A. has been extremely
government toward the farm sector. successful and according to some
BANRURAL S.A. initiated operations in observers, possibly even unique due to
January 1, 1998. It is the most profitable its results and the economic, social,
commercial bank in Guatemala and the political, and especially cultural
third largest in terms of assets. It has over conditions of the Guatemalan
300 agencies and conducts the majority of environment in which it was
its operations in rural areas. It grew out of implemented. During its first decade
the reform of a failed state agricultural BANRURAL S.A. has performed
bank, maintained a mission to serve rural extremely well in terms of
entrepreneurs. profitability, self-sustainability, and
5.5.2. Financing Policy
BANRURAL S.A. has as its main • Profitability: BANRURAL S.A. has
objective “to promote the economic and experienced a significant and
social development of rural areas through sustainable increase in its profits. It
the stimulus and facilitation of savings, has more than doubled its profits
credit services, and other financial during the last four years. Also, after
services to credit unions; non- only a few years operation,
governmental organizations (NGOs); BANRURAL S.A. has become one of
small size farmers associations; micro, the most profitable banks of the
small and medium size entrepreneurs; Guatemala banking system. It is, in
both directly or indirectly through other fact, the third most profitable bank in
legally recognized institutions”. terms of Return on Equity (ROE).
The profitability registered by
BANRURAL S.A. confirms that the
5.5.3. Methodology financial services to the poor, if they
Contrary to most banking institutions, are done correctly, can be profitable;
BANRURAL S.A. mission is to generate and that promoting micro, small and
a fair profitability without neglecting its medium size enterprises, and rural
social mission i.e. to promote the integral development DFIs must be profitable.
development of the country with universal

Handbook on Best Practices in Agri/ Rural Finance

• Self Sustainability: BANRURAL services by BANRURAL S.A. have

S.A. has not only been a profitable had a high demand due to their good
banking institution but also a self- quality, generating appreciation by
sustainable institution. It did not have their clients. Likewise, the real rates of
any explicit subsidies over the past growth registered in the volume of
many years which indicate that liabilities also suggests that the
BANRURAL S.A. generates enough creditors of BANRURAL (mainly the
income to cover its costs and that it depositors) not only have trust in
does not depend on explicit subsides BANRURAL S.A. but are satisfied
to survive. with the quality of the financial
services of intermediation offered by
• Outreach: BANRURAL S.A. has the institution.
been profitable, self-sustainable, and
very successful in achieving its social • The Effective Rates of Interest: The
mission by obtaining very good results growth in real terms in the volume of
in terms of the extent, depth and credits of BANRURAL S.A. is not
quality of outreach. BANRURAL has due to the fact that this institution is
shown that it is possible to provide charging subsidized interest rates but
credit services to a significant number to the fact that it is charging
of clients and to mobilize a large competitive and effective interest
amount of savings (especially small rates—the effective active rate of
scale savings). Unlike some interest charged by BANRURAL S.A.
government owned public is below the average market rate. The
development banks, BANRURAL effective rate of interest charged by
S.A. has been able to significantly BANRURAL S.A. has always been
increase its geographical coverage. lower than the average market rate of
Currently, BANRURAL S.A. is the interest and has moved according to it.
largest bank in terms of geographical
coverage in Guatemala, and the largest • Striking Recovery Rate: To evaluate
bank in terms of number of points of the quality of credit services of a bank,
service in any country in Central it is not enough for the bank to have
America. The major growth in points positive growth in their credits;
of service has been in the rural areas. because the positive growth might be
BANRURAL S.A. provides financial due to the fact that it is charging
services to different segments of the subsidized rates of interest. This
population. Its clients are not only positive growth may be due to a bad
from the metropolitan area, but also, selection of its clients, or to “adverse
more importantly, from the interior of selection” if the bank is charging
the country. Likewise, the extensive interest rates that are too high.
coverage and geographical Therefore, it is necessary to evaluate
distribution of its points of service the institution in terms of the recovery
have been a key factor for the of its loans. In contrast to the majority
popularity of the financial services of of public banks BANRURAL S.A. has
BANRURAL S.A. and the financial had good performance in its credit
intermediation between the recovery.
metropolitan area and the non-
metropolitan area. BANRURAL S.A. has managed to reduce
its rate of losses in the concept of non-
• Growth of the Volume of Services: recovered credits to a minimum thus
The high growth in real terms increased its recovery rate to 98.82% in
registered in the average volume of addition to decline in defaulted credits.
credits, suggests that the credit
Handbook on Best Practices in Agri/ Rural Finance

5.6. ACLEDA Bank, process, the existing NGO transferred the

assets and on-lent its liabilities (long term
Cambodia loans from donors) to the new ACLEDA
The mission and vision of ACLEDA Bank Bank. In return, it received 32% of the
is to market a superior nationwide Bank's capital of US$4 million; the
delivery of high-quality bank products and ACLEDA Staff Association, established a
services at premium prices to meet the trust to give its staff an equity interest up
needs of the financial and commercial to 19% and the remaining 49% has been
sector and the general public throughout taken up in equal parts by four foreign
Cambodia in a context where such investors, namely the International
products and services are presently of Finance Corporation (part of the World
indifferent quality and limited to only a Bank), DEG-German Investment &
very few major towns. Development Company, FMO-
Netherlands Development Finance
The objective of ACLEDA Bank is to Company and Triodos Doeun
maximize shareholder value by providing (Netherlands).
and selling ACLEDA Bank’s commercial
and retail products and services targeted at Since transformation ACLEDA has
the general public and MSE/ SME expanded its business achieving an
segments as well as selected services such average portfolio growth rate of over15%
as Cash Management specially developed p.a. since 1997.
for the larger organizations in the
financial and commercial sector (e.g. 5.6.2. Financing Policy
banks, microfinance institutions, NGOs,
national, multinationals and government). ACLEDA Bank is endeavoring to market
a superior nationwide delivery of high-
quality bank products and services at
5.6.1. History premium prices to meet the needs of the
ACLEDA was established in January financial and commercial sector and the
1993, as a national NGO for Micro and general public throughout Cambodia in a
Small Enterprises Development and context where such products and services
Credit. From the earliest days ACLEDA are presently of indifferent quality and
received the support of a number of major limited to only a very few major towns.
international development agencies. Two
factors, namely expansion of network and 5.6.3. Methodology
ability to operate at a profit to ensure
sustainability, led the management ACLEDA Bank targets the lower segment
international partners to conclude that of the market and provides loan to both
ACLEDA should be transformed into a individual (small business loan) and group
bank. This would not only provide a (micro business loan). It caters to the
secure regulatory framework lacking banking needs of both urban and rural
under previous status but would enable it population without discrimination. To be
to enlarge its range of funding options eligible for individual loans, the
(e.g. equity injection, taking public applicants must qualify according to the
deposits, obtaining commercial inter-bank following criteria:
loans) to support expansion of its core
micro-finance business. a) Land and building or substitute
ACLEDA completed the transformation b) Resident in the areas where a
from NGO to a bank and the National branch office is operating.
Bank of Cambodia granted ACLEDA a c) Unwilling to move from the areas
license on October 7th, 2000. Under the until the loan is completely
Handbook on Best Practices in Agri/ Rural Finance

d) Their ability to repay their loans business location to the suppliers or

through profitable businesses or the other way round. If they want to
secure sources of income. pay off the purchase on credit or
collect the sale on credit, ACLEDA
5.6.4. Distinctive Features Bank is the meeting point for the
service payment and fee collection for
• Outreach Structure: those entrepreneurs and companies.
Geographically, ACLEDA Bank has
expanded to have the largest network
• Products and Service: ACLEDA
in Cambodia, which will benefit
Bank provides loans to service, trade,
savings, transfer, and other financial
manufacturing, agriculture, and
services. More district offices and
agriculture related activities. All loans
service posts got established to be at
are provided at ACLEDA Bank
closed length to the customers in order
branches and offices, and the loan
to be more convenient and serve them
repayment is also done at ACLEDA
quickly. ACLEDA Bank’s
Bank branches and offices. ACLEDA
management believes that having
Bank credit officers only collect the
offices closed to the customers, the
loan repayment after they are
Bank can serve the customers better
and faster. It is more convenient to
both ACLEDA Bank and customers.
• Micro-business or Group Loan: It is
Furthermore, this is the competitive
a group guaranteed loan whereby the
advantage of ACLEDA Bank where
members guarantee each other. Loan
other commercial banks cannot do the
amount shall not exceed US$380. In
same at this stage.
case one member cannot pay, the
other members will pay for them.
• Access to Clients: ACLEDA Bank
can guarantee that the customers can
• Small Business Loan: It is an
always have access to ACLEDA
individual loan. Loan size ranges from
Bank’s financial services in both rural
US$380 to US$10,000. In order to
and urban areas. ACLEDA Bank has
have access to this loan, the customer
noted that financial intermediation is a
must have business ideas, technical
vital element in developing local
skills, permanent location (residence
economies and reduces the relative
at least of one year). Small business
dependence of the country on foreign
loan is a collateralized loan.
capital by utilizing domestic savings
for investments.
• Medium Size Business/ Small-scale
Industry Loan: The loan size is from
• Customers’ Benefits: All ACLEDA
US$10,000 up to US$70,000. It is
Bank’s target groups are the
collateralized loan.
entrepreneurs of micro and small
businesses, and medium sized
enterprises; and the general public • Training and Education: - After the
who are living in both urban and rural customers have filled in the format of
areas including the farmers in the business plan, ACLEDA Bank
Cambodia. The customers of small provides basic training (business
and micro businesses can have the consultancy service) on business plan
place where they can depend on, in development to the customers of small
terms of financial services, they can and micro businesses. For the matter
either borrow or deposit with the of convenience, most of the training is
ACLEDA Bank. Furthermore they done at the customers' houses. The
don't need to travel from their training is very simple, whereby the

Handbook on Best Practices in Agri/ Rural Finance

customers can bring their literate them strictly. These policies help a lot
relative with them to help them with in decentralizing structure of decision
the reading and writing, and making, especially in the
calculation for those who are illiterate. geographical, far remote outreaches,
The training for business plan where infrastructures are limited. A
development lasts about two hours in more sophisticated organization like
total. ACLEDA Bank provides basic ACLEDA Bank requires more
training on business plan development sophisticated IT and MIS systems and
that is used to determine how much the information produced. The IT
loan each customer should obtain, and demands a more disciplined approach
explain the customers the importance to managerial responsibilities in
of using banking service to manage particular the use of management
their capital properly (information on reports. With the sophisticated system,
savings/ deposit); fund transfer; and ACLEDA executive management can
other bank products. track down the deficiencies and solve
them in time, before the problems
• Management Capacity: ACLEDA become bigger. As for the branches
Bank executive management is and offices staff, they can work much
responsible for the day-to-day more productively. ACLEDA Bank
management of ACLEDA Bank and Management has and continues to
their policy is guided by the board of focus on the key management areas:
directors with a broader range of skills Operational Risk; Asset & Liability
and experiences. In order to have the Management; Internal Control &
banking operation run smoothly, the Audit and Information Technology
executive management establishes all have all fully justified the effort
policies in place, such as: credit, invested in them – some times in the
financial, cash management, customer most trying circumstances. Human
service, internal control, human Resources of ACLEDA Bank set great
resource, and staff regulation policies store by the quality of its training both
and make sure that all branches and for novices as well as regular refresher
offices of ACLEDA Bank implement programs for all senior staff.

Handbook on Best Practices in Agri/ Rural Finance

6. Conclusion
An assessment is made of the various
• Simplified loan appraisal procedures
reduce the time required for loan
processing, loan approval and loan
strategies that these case study institutions
use, to manage the specific costs and risks
in agricultural lending. Guiding principles • Close contacts with local
or “better” practices in agricultural organizations and networks provides
lending have been drawn up from these relevant client information.
experiences. It is firmly believed that • Effective management information
there are really no “best” practices that systems provide crucial information.
can be applied to all circumstances. • Diversification of the rural loan
Instead, the development of better rural portfolio in terms of location and
and agricultural lending technologies is lending purposes helps to balance the
seen as a dynamic and ongoing process uneven staff work load due to the
that guides the lending institution towards seasonality in agricultural lending.
meeting the specific demands of the rural
clientele. Guiding principles can be • A solid background in agronomy,
deduced from the institutions' operations, farm management and rural economy
but care must be taken in replicating their is a prerequisite for good loan
operations: a solution adequate in one appraisal.
socioeconomic environment will not • Realistic agricultural loan demand
necessarily be suitable in another. It assessment is crucial for a good loan
should not be forgotten that the income portfolio planning and administration.
levels and income-generating activities of • An assessment of the specific risks
the target clientele largely determine the that are associated with different
effectiveness of specific modes of agricultural production activities is
operation. essential in determining the potential
risk exposure of lenders.
After analysing the salient features, • Loan appraisal should include a
lending methodologies, modes of thorough assessment of the borrower
operations, clientele base, sustainability, loan repayment capacity and his
outreach, recovery mechanisms, etc. of creditworthiness; also external risk
these model financial institutions, some factors of farm production should be
lessons can be drawn which will perhaps taken into account.
work as useful input in future policies
undertaken by banks and other financial • Collaboration with organizations
institutions. These are; which know farmers well reduces
client information costs and risks of
• A decentralized structure enables lenders.
broad client coverage. • Agricultural lending should start in
• Delegation of loan authority can production zones that present low
effectively cut loan administration risks; operations can then gradually be
costs. expanded to more risky areas.
• Qualified, well trained and highly • Individualized loan products and loan
motivated field staff has a positive repayment schedules that are set in
impact on the lending productivity. accordance with the loan repayment
• capacity of the borrower reduce the
risk of loan default.

Handbook on Best Practices in Agri/ Rural Finance

• Loan portfolio diversification serves client information costs. Farmer-

to protect agricultural lenders against borrowers can be provided with
covariant risks. essential non-financial support
• Managing of external risks through services such as agricultural
loan rescheduling, agricultural extension, and business and financial
insurance and emergency assistance management training.
can assist both the farmer-borrower • New information technologies provide
and the agricultural lender. significant scope for the adoption of
• Staff incentives systems motivate staff innovations in bank automation,
and effectively increase their lending electronic data processing and
productivity. development of new agricultural loan
products. For instance, a rural bank in
• Close monitoring of markets and India sponsored by the Bank of
exposure to lending risks is essential Baroda has launched a credit card
for agricultural lenders. scheme. Farmers who are credit card
• Clear information should be given to clients may get advances up to a
borrowers on the financial conditions certain limit per acre of land without
of loans and loan repayment additional formalities. Another
obligations. example is the use of smart cards that
• Close contacts between the lender and allow farmers to draw loans on
the borrower are conducive for an retailers of fertilizers and other
atmosphere of mutual trust that agricultural inputs. For the lender,
improves credit discipline. significant cost efficiency can be
affected by using this form of loan
• Agricultural lending institutions
should be free of political interference
in their daily management.
These points coupled with other desirable
• Agricultural lenders as part of their policy inputs can help banks devise
risk management strategy need to policies that will improve not only their
monitor policy and market changes risk management techniques but will also
that affect their agricultural clientele. have a healthy impact on agriculture
• Collateral substitutes replace more finance as a whole. However, to bring
conventional types of loan guarantees agriculture sector at par with other sectors
and can provide important loan of Pakistan, all the stakeholders; including
repayment incentives. banks, MINFAL, SBP, etc. need to
• Collaboration with local organizations perform their roles effectively and
can be extremely useful to reduce efficiently.


Handbook on Best Practices in Agri/ Rural Finance

7. Summary of Operating Methods, Performance, etc. of Financial Institutions

Item BAAC Land Bank BRI-UD GB BanRural ACLEDA Bank
Banco de Desarrollo
Rural, S.A.
Country Thailand Philippines Indonesia Bangladesh Guatemala Cambodia
Year of 1966 1963 1895 1976 1970 1993 as NGO
Establishment Transformed to Restructured in Transformed to
Universal Bank in 1998 Bank in 2000
Ownership Government Government/ State Government (70%) Semi-Government Government Semi-Government
Source of Funds Savings/ Deposits Govt. + Deposits Savings/ Deposits Deposits Savings/ Deposits Donors/ Deposits/
Objective To stimulate To serve rural sector To provide broad- To improve To promote To maximize
agriculture through clients in areas based credit for any conditions of rural economic and social shareholder value
extending financial where banking is type of rural poor by providing development of by providing all
services to farming either limited or is economic activity them access to rural areas through banking services
community. non-existent. credit, saving facilitation of targeted at general
facilities, etc. savings, credit public, MSE/SME
service, etc. segments, etc.
Nature of Agri Bank Specialized Commercial Bank Microfinance Bank Commercial Bank Transformed from
Institution Government Bank NGO to
with Universal Specialized bank
Banking License. and now a
commercial bank,
oriented towards
Target Clientele Agri/ Rural Rural farmers and Agri/ Rural Poorest of the poor Farmers, merchants, Lower segment of
population fisherman population with handsome artisans, and small the market - both
portfolio in Agri/ and medium size urban and rural
Handbook on Best Practices in Agri/ Rural Finance

Item BAAC Land Bank BRI-UD GB BanRural ACLEDA Bank

Banco de Desarrollo
Rural, S.A.
Rural sector entrepreneurs population
Outreach 98% NA 98-99% 98% NA NA
Recovery rate 95% 75% 98% 99% 99% NA
Collateral Yes for individual Yes Yes No, but compulsory Yes Group guarantee,
requirements loans and No for savings and sometimes,
groups tied to loan collateral
Management Well developed Well developed Well developed Well developed Well developed Well developed
information system

Websites or [Banco de Desarrollo Rural, S.A. (Banrural)]


Handbook on Best Practices in Agri/ Rural Finance