Devising a strategy for agricultural intensification

To the extent that local tastes, availability of different varieties, and ecological conditions permit, Bangladesh could expand the area planted with high yielding varieties. Other Asian countries fall in the 75 to 90 percent range-twice the level of Bangladesh. Closing this gap within the next five years and raising yield per hectare to 3,500 kilogram are objectives that deserve close attention.

Increasing yields by planting high yielding varieties and applying more fertilizer should be met with an expansion of irrigated area. Some of this expansion would be accomplished with the installation of more tubewells. It may also be possible to enlarge the canal networks or improve the efficiency of water management facilities in certain areas. Tubewells can generate backward linkages to local machinery and metal working industries, as has happened in both East and West Punjab. Forward linkages to repair services can also be significant if a large number of tubewells is installed. Upgrading irrigation networks is a source of jobs for initial construction and future maintenance. In addition, it gives rise to demand for construction materials, allowing existing production establishments to expand and encouraging new entrants.

Intensifying agriculture and promoting crop diversification will require a bigger dose of extension services. Bangladesh already spends more on extension per hectare of arable land than India or Indonesia (table 21). But its outlay is far below that of Thailand, China, the Philippines, Sri Lanka, and Malaysia. Bangladesh should be able to approach the level of Sri Lanka over a five-year period, and doing so would promote other elements of the strategy. But increased spending alone will not help. Changes must be made in the nature of research and the organization of extension. Currently, the National Agricultural Research System conducts applied research mainly on rice, wheat, and potatoes.

Diversification to higher-value cash crops calls for research on hybrid varieties of vegetables, fruit, oilseeds, and pulses that can be grown under irrigated conditions. In addition, post-harvest and processing research should be made a priority, guided by the needs of farmers. Extension activities are conducted largely by block supervisors and employees of the Department of Agricultural Extension in the Ministry of Agriculture. More involvement by NGOs and the community are needed to raise payoffs.

Support from credit and marketing facilities would make it easier to shift to a more productive farming regime. Bangladesh is a pioneer of innovative credit schemes for poor households. Thus there is already an institutional base for extending more credit to farm households to purchase fertilizer and other inputs.

Although disbursing credit is an important activity of NGOs, it accounts for only about 10- 15 percent of their programs, except for a few NGOs, like Grameen Bank, Bangladesh Rural Advancement Committee (BRAC), Proshika, ASHA, for which credit constitutes a large part of their activities. There are now about 100 NGOs that have well established credit programs. Most of these, Grameen Bank and BRAC excepted, have obtained financing through the Poverty Foundation (PKSF). In the last decade these institutions disbursed about US $ 1 billion to about 3.5 million borrowers-80 percent of whom are women. In fiscal 1994 annual disbursements of micro-credit are estimated to be about US $450-500 million. Between 75 and 80 percent of the funding for these programs has come from grants or highly concessional loans provided by donors, foreign NGOs, and the Government of Bangladesh. Although precise figures are unavailable, rough estimates put cumulative funding from these sources at about US $350-400 million. Borrowers cumulative savings fund the programs. Four institutions account for about 99 percent of lending and serve about 96 percent of the borrowers: Grameen Bank (85 percent of loans and 46 percent of borrowers), BRAC (10 percent of loans and 44 percent of borrowers), Proshika, and ASHA.

Because of the enormity of unserved need-only about 6 to 8 percent of the poor people have been served-most institutions attach high priority to rapidly increasing outreach. Large and older institutions are approaching break-even status, because of rapid growth, gains arising from scale economies and a larger number of profit-making borrowers. However, most of the institutions still cover their high group and social mobilization costs with grants (from donors), income from commercial activities directly operated by the NGOs (such as fish ponds); and voluntary services provided by many of the organizers of small and medium-size NGOs. Thus many NGOs operate as "quasi commercial" and "quasi-formal" organizations.

National commercial banks (NCBs) have been providing group-based micro-credit loans though some of their rural branches on a very limited basis. These loans carry an interest rate of 16 percent. Although NCBs claim to be breaking even at this rate, it is highly unlikely that they would be doing so given their staff-intensive nature. One successful initiative supported by the NCBs is provision of micro-credit to members of a national NGO-Swanivar-which organizes groups and links them with NCBs. The increasing availability of credit through traditional and newer nontraditional channels (NGOs) even if it is in small doses is influencing the spread of nonfarm activities. It is also having an effect on farming.