How a new Seasonal Loan Product for Char Farmers is spearheading systemic change in the Bangladesh Finance Market System is discussed in this case study. Despite significant and breakthrough work in pioneering access to finance for the poor in Bangladesh, such services remain scarce in hard to reach chars. This market failure is primarily related to the nature of exchange due to high transaction costs. Lack of information and poor intermediation functions means excessive search and information costs are incurred. CLP used a M4P approach to identify areas preventing farmers from accessing appropriate finance. The evidence indicated that available products and services were unable to meet all the needs of chars farmers. A lack of market information (for farmers as well as financial market players) and limited assistance for farmers who get loans constrained market growth. Finally, the remoteness and unorganised char farming community was a risk few institutions were willing to take. These areas were immediate priorities and CLP targeted interventions to address the constraints.
Farmers were supported by CLP to improve their productivity and to farm scientifically using modern technologies, livestock practises and getting access to ready feed, medicines and a network of para-vets and other services. Collective action groups were formed with the Char Business Centre being the hub for market information, loan negotiation and aggregating products. A critical intervention was to work with United Finance to develop new loan products that were appropriate for the payment and receipts cycles of livestock businesses, to pilot a seasonal loan product and help them to build a business model to scale up the initiative. Lessons CLP learnt in doing this was to focus on supporting United Finance to change their business model, to ensure that farmers have the necessary technical skill to farm scientifically, and to be realistic about the time and effort it takes to bring about systemic change, in this case, three years.
Charles, R.; Pritchard, M. CLP Access to Finance (A2F): Case Study. Chars Livelihoods Programme (CLP), Dhaka, Bangladesh (2016) 23 pp.