agrilife24.com business dekk:1, September, 2016 (Jessore):IFIC Bank Limited has partnered withthe Feed the Future BangladeshRice Value ChainProjectfunded by USAID and implemented bythe International Rice Research Institute(IRRI),Bangladesh, with support from USAID’smSTARproject in Bangladesh to pilot a new innovative micro-credit facility for farmers in Jessore and Satkhira districts.
In this system mobile phones are used to transfer money from banks to farmers. They then pay for inputs and services by transferring funds from their mobile phone account to the retailers mobile phone account.By using these systems, known as mobile financial services (MFS), farmers will be able to access crop production credit without having to go to a bank branch.
An initial batch of 100 farmers has been registered with IFIC Bank’s mobile financial services(MFS) platform through which they will be provided with agricultural loansworth BDT 5,000 to BDT 20,000.IFIC Bank Limited will offer farmers one of their newest products‘IFIC Amar Account which is a unique transactional account where both deposit and overdraft facility is enabled in a single account. IFIC Bank introduces this type of account for the first time in Bangladesh. The service will be serviced through the IFIC Mobile Bank. This is a significant improvement over the standard micro financing as the low transaction costs incurred through using the mobile phone system mean they can offer the “unbanked farmers” interest rate of 10% which is much lower than those offered by traditional micro finance institutes.
IFIC Bank, in coordination withIRRI, Bangladesh and with support from USAID’s mSTAR project launched this innovative intervention at the Rural Reconstruction Foundation (RRF) in Jessore today. Kbd. Chaitanya Kumar Das, Director (Monitoring), Field Services Wing, Department of Agricultural Extension (DAE) graced the event as chief guest while Mr. Shah Md. Moinuddin, Deputy Managing Director and Head of Business, IFIC Bank Ltd, Kbd. Chandi Das Kundu, Additional Director, DAE, Jessore Region, and Shah AbulKashem, Deputy General Manager, Bangladesh Bank, Khulna were present as special guest. The event was chaired by Mr. Timothy Russell, Chief of Party (CoP) of Feed the Future Bangladesh Rice Value Chain Project.A total of 25 prescreened farmers were also present at the event to have their registration done with the IFIC Bank’s MFS platform.
“This mobile phone based banking system will encourage farmers’ groups to invest as a business group which will eventually support the cash flow in the country’s economy. This type of initiatives is important to implement the government’s 2041 vision… Quality agri business depends on quality production, processing and marketing of agri products which can be expanded by a financial service like this – a mobile phone based banking transaction. This will save farmers’ time and money that now occurs from the hassle of commuting to a bank branch from their remote locations, Mr. Kbd. Chaitanya Kumar Das, Director (Monitoring), Field Services Wing, DAE, , said at the event.
The provision of agricultural loans thorough the ‘IFIC Amar Account’in collaboration with IRRI is tailored fora farmersto make sure they have relevant to their special needs such as long payback period, payment at the end of the loan period and payment without the need to g to a bank branch. Further with this credit facility farmers will be able to use saving schemes and other products and services of the bank. This initiative will not only help them to get easy access to finance but also encourage farmers to save some of their income. This will, improve their lives, health, education and entrepreneurship. To make banking services more cost effective we are planning to include all the stakeholders like retailers, traders under the umbrella of IFIC Mobile Bank so that cash less environment will prevail.
The pilot programwill also includefour input retailers fromJessore and Satkhira. Each retailer will open a merchant account with IFIC Mobile Bank allowing participating farmers to purchase inputs using their IFIC mobile bank accounts. The pilot program will also encourage and allow farmers to enroll into flexible tenured savings scheme and save BDT 100 per month at an annual interest rate of 7.5%.“We are hoping to have more implementation partners from international level like IRRI. As being an urban based commercial bank, rural penetration is being always a concern of the bank, but the vision of IFIC bank is to overcome all the hurdles to be the best and this project is the first step towards that excellence,” Mr. Shah Md. Moinuddin, said at the event.
“Farmers have to pay approximately 25 – 30% interest when they borrowfrom moneylenders to continue their cultivation. So, IRRI and IFIC Bank joined forces in August with a proposal to develop an agri-credit program through mobile phone based banking. In September, we are now here with you with this innovative financial service where the interest rate will be counted on the outstanding money only… This has been launched as a pilot project for six months. We want to continue this noble work in the future. So, your timely repayment of the loans will let us provide you with more credit as a tested party,” said Mr. Shah Md. Moinuddin, Deputy Managing Director and Head of Business,IFIC Bank.
This pilot programis the first example to date in Bangladesh where a bank is extending micro-credit agricultural loans to farmers using the Mobile Banking system. Smallholder farmers have traditionally had a difficult time securing loans from banks due to the rigorous due diligence process. Participating farmers will be able to avail agricultural loan at lower interest rate with flexible repayment option. Additionally, farmers will be able to purchase inputs from participating retailers more conveniently and securely. Moreover, farmers will have access to a mobile-based savings product offered by IFIC Bank Ltd, something that many of other schedule banks have not previously had access to given the limited number of bank branches at the rural level.
Based upon a positive outcome from this pilot, IFIC Bank Limited plans to extend the aforesaid credit and other financial services to more smallholder farmers. All the stakeholdersmainly IRRI, IFIC and mSTAR have plans to bring other value chain actors, such as input dealers, companies, millers and wholesalers as part of this ecosystem, ensuring that all actors can benefit from the digitization of payments along the value chain.
Event participants, among others, wereMrs. Ferdousi Begum, Head of Retail Bank, Mr. Asaduzzaman, Head of Corporate Communication and Branding,and other regional and divisional employees and of IFIC Bank, Mr. M. AtaurRahman, Team Lead of mSTAR/Bangladesh project, Mr. A.K.M. Ferdous, Senior Specialist – Agricultural Research and Development, and Hub Manager – Jessore, Feed the Future Bangladesh Rice Value Chain Project, IRRI, Bangladesh, Mr. Md. FarukHossain, Senior Specialist – Agricultural Research and Development, and Hub Manager – Khulna, Feed the Future Bangladesh Rice Value Chain Project, IRRI, Bangladesh, Bikash Kumar Roy, Deputy Director, Jagarani Chakra Foundation (JCF), a total of 20 farmers, three retailers, three millers, representatives of ACI and The Metal (Pvt.) Ltd., and local NGO officials, present at the event.-PRESS RELEASE