Rural Banking

In this essay I shall be discussing the factors which influence the level of and access to unsecured debt held by households.

Dealing with risks such as health problems, loss of crops, loss of livestock, the death of a family member, loss of assets, income and employment is much harder by poor and low-income groups than others. Many poor households engage in activities which are smaller and bringing greater degree of risk and uncertainty and therefore likely scale financial risks and income. Every serious illness, every accident and every natural disaster threatens the existence of the poor and usually leads to more poverty. Thus the vicious cycle of poverty carries on.

However, the concept of rural markets, in India, is still evolving and possesses like any other sector its own set of opportunities and challenges. The primary objective of this study will be understanding

New farmers’ chances for success will be greater if they can avoid going into debt to finance their farm operation, since the initial profits can be reinvested in the farm rather than paying the bank. Credit cards, with their extraordinarily high interest rates, are a particularly dangerous way to finance a farm. Thinking carefully about options, and resisting temptations to buy more and better equipment than is needed is important for all farmers to remember. Many operations have been sunk by overcapitalization. Some operations will benefit from a loan, especially if they have a solid business plan that exhibits a realistic strategy for paying it off.

One important element of the caste system is the concept of “begar”, or the requirement of Dalits to provide service without payment. Traditionally, this entailed undertaking the most undesirable jobs as a contribution to the community, a category that includes agricultural work. As a cultural norm, “begar” has endured into modern times, and is often exploited by landowners as a means of sanctioning a system of debt bondage. The fact that Dalits are typically landless means that they are oftentimes entirely dependent upon their landlords economically. This is particularly true of the indigenous Tharu communities in western Nepal, where most of that country’s rice is grown. Within the exploitative debt labor system known as Kamaiya, Tharu families depend upon their landlords for even the most basic food and shelter. Their position at the bottom of the caste system and their complete economic dependence upon landowners make Dalits particularly prone to exploitation. Often they are forced to accept loans from their employers to survive and to meet social obligations associated with death and marriage. These loans are designed to be impossible to pay back, and because Dalits are traditionally denied education, they are left with little recourse but to accept the loans and become indebted to their landlords. Just as one’s position in the caste social hierarchy is inherited, so debts are passed from one generation to the next. Debt bondage in South Asia is implemented with varying

Banks are the most significant players in the Indian financial market. They are the biggest purveyors of credit, and they also attract most of the savings from the population. Dominated by public sector, the banking industry has so far acted as an efficient partner in the growth and the development of the country. Driven by the socialist ideologies and the welfare state concept, public sector banks have long been the supporters of agriculture and other priority sectors. They act as crucial channels of the government in its efforts to ensure equitable economic development.

Therefore, “There are a number of people in India who still live on the street and beg the whole day to eat a meal. Underprivileged children are unable to attend school and those that have the opportunity drop out after a year or so. People below the poverty line live in unhygienic conditions and are prone to many health problems. With this, the vicious cycle of poor health, lack of education and more poverty keeps on increasing” (Kaur, 2013, para. 3).

So many people are living below the poverty line. Day by day poverty is increasing in the rural areas. If we see in the late 90s and if compare the economic conditions of urban and rural areas of the country it became more significant. This trend has been credited to an uneven impact of the financial go-slow in the rural areas affected by low economic development failure in public sector development spending and lower worker payment. There are also major differences in the different regions of Pakistan that donate to the country’s growing poverty.

Integrated micro financial services through the development of saving-loans Cooperatives (Credit Unions) and Rural Banks (BPR)

India is the fastest growing economy, yet it home for 1/3rd of the world’s poor1. Post liberalisation in 1991, India has registered a tremendous growth in its economy. But along with this rapid growth, there has been a significant increase in the inequalities in the distribution of wealth and income. Though cities have grown rapidly, the growth in rural areas have been rather slow or stagnant.

In developing regions around the world, hundreds of millions of people live in rural areas on less than $2 per day. This level of poverty forces communities to make hard choices between food, health care, and education. It is the poverty level where an estimated 11 million children die every year. Many of these communities are not fits for traditional microfinance, which tends to be primarily urban, and significant portions of their land are not suitable for agriculture.

There is growing realization among marketers about the enormous untapped potential of India’s rural markets. The Indian rural market with its vast size and demand base offers great opportunities to companies. In India, there are 6,42000 villages . While agriculture used to be the major source of income in rural areas, over the past 10-12 years, the dominance of agriculture has been rapidly declining. The contribution of agriculture to India’s GDP was less than 20% in 2008-09. There is a sizeable population of self-employed persons in the hinterland and quite a few of them are into services such as repair and maintenance of motors and pump sets, televisions and other electrical

The paper titled “Poverty Profiles and Coping Strategies of the Hoar (Ox-bow lake) Households in Bangladesh” provides poverty estimates using different methods for Hoar areas of Bangladesh. The paper also gives a clear overview of how poor households face the seasonal poverty incidence that is endemic to this region. The main strength of the paper is relatively large sample size covering hoar areas across different districts of north-eastern part of Bangladesh. Since author(s) has a rich data set, I was expecting that there would be many interesting findings and dynamics from the author’s analysis. However, findings on poverty estimates and coping strategies that the author obtained are less dissimilar than what we can observe in most of the rural areas in Bangladesh. In addition, there are some issues that the author needs to take care of before the paper got published. My comments are as follows:

The generation of self-employment in non-farm activities requires investment in working capital. However, at low levels of income, the accumulation of such capital may be difficult. Under such circumstances, loans, by increasing family income, can help the poor to accumulate their own capital and invest in employment-generating activities (Hossain, 1988). Commercial banks and other formal institutions fail to cater for the credit needs of smallholders, however, mainly due to their lending terms and conditions. It is generally the rules and regulations of the formal financial institutions that have created the myth that the poor are not bankable, and since they can’t afford the required collateral, they are considered uncreditworthy (Adera, 1995). Hence despite efforts to overcome the widespread lack of financial services, especially among smallholders in developing countries, and the expansion of credit in the rural areas of these countries, the majority still have only limited access to bank services to support their private initiatives (Braverman and Guasch, 1986). In the recent past, there has been an increased tendency to fund credit programmes in the developing countries aimed at small-scale enterprises. In Kenya, despite emphasis on increasing the availability of credit to small and microenterprises (SMEs), access to credit by such enterprises remains one of the major constraints they face. A 1995 survey of small and

Factors Affecting on loan Repayment Performance of Farmers in Khorasan-Razavi Province of Iran Mohammad Reza Kohansal Assistant professor of agricultural economic dep., Ferdowsi University of Mashhad, Iran Hooman Mansoori Msc student of agricultural economic dep., Ferdowsi University of Mashhad, Iran Abstract This study investigated the factors influencing on repayment behavior of farmers that received loan from agricultural bank by using a logit model and a cross sectional data of 175 farmers of Khorasan-Razavi province in 2008.