June 27, 2007
$600 Mn World Bank Loan
For Farmers in 12 Indian States By Arun Kumar
Washington
The World Bank has approved one of its largest support packages to
India with a US$600 million loan and credit designed to transform
access to financial services for India's poorest farmers in 12
states.
The goal is to transform them into efficient and commercially viable
institutions responsive to the financial service needs of India's
poorer farmers, including small and marginal farmers, the Bank
announced Tuesday.
The Strengthening Rural Credit Cooperatives Project supports the
Government of India's programme to reform and revitalise the
country's rural Credit Cooperative Banks (CCBs).
These include some 31 State Cooperative Banks, 367 District Central
Cooperative Banks and over 100,000 Primary Agricultural Credit
Societies.
"Better access to finance for India's rural poor is absolutely
critical for higher rural growth, for reducing inequality, and
ultimately, alleviating poverty," said Isabel Guerrero, World Bank
Country Director for India.
"By providing small farmers with improved financial services, such
as credit, savings, remittances and insurance, this project will
play a significant role in helping India's rural poor benefit from
growth opportunities."
Twelve Indian states have signed up to the reform programme.
Potentially viable CCBs in those states will commit to a set of
far-reaching legal, regulatory, governance and institutional reforms
which will open the way to financial and operational restructuring.
In the process the CCBs will be recapitalised with grants to wipe
out the accumulated losses, the value of members' capital will be
restored, and a minimum capital to risk weighted assets ratio (CRAR)
of 7 percent will be achieved.
The project will also provide technical assistance throughout the
process to strengthen CCB governance, managerial and operational
performance, and support the computerization for enhanced efficiency
and transparency.
CCB members, particularly small and marginal farmers, will receive
training in areas such as financial literacy and a strong project
focus on monitoring and evaluation systems, will include monitoring
by CCB members themselves.
"The project will transform India's rural credit cooperative banks
into efficient and commercially viable institutions that can provide
financial services to the poorest farmers at affordable terms," said
Priya Basu, World Bank Lead Economist and project team leader.
"This will enable poor farmers to break out of the clutches of
usurious moneylenders, diversify economic activities, increase
incomes, and improve their livelihoods."
The 12 states which have signed the Memoranda of Understanding with
the Government of India and the National Bank for Agriculture and
Rural Development (NABARD) include: Andhra Pradesh, Arunachal
Pradesh, Bihar, Gujarat, Haryana, Madhya Pradesh, Maharashtra,
Orissa, Rajasthan, Uttar Pradesh, Uttarakhand and West Bengal.
The loan from the International Bank for Reconstruction and
Development (IBRD) has 20 years maturity, including a five-year
grace period.
The credit is provided by the International Development Association
(IDA), the World Bank's concessionary lending arm and has 35 years
to maturity and a 10-year grace period.
Since the early 1990s, India has introduced impressive financial
sector reforms that have resulted in increased competition,
diversification, openness, and depth. Yet, India's rural population
still has limited access to finance from formal sources, relying
instead on extortionate money-lenders.
The problem is particularly severe for small and marginal farmers,
who are among the poorest of India's rural dwellers farming,
respectively, less than one acre and between one and four acres of
land.
World Bank estimates suggest that some 87 percent of marginal
farmers and 70 percent of small farmers have no access to credit
from a formal financial institution.
Boloji.com is owned and managed by Boloji Media Inc Privacy Policy |
Disclaimer
No part of this Internet site may
be reproduced without prior written permission of the copyright holder.
