20/10/2017
Palli Sanchay Bank encourages micro-savings, gives collateral-free loans to rural poor
Md. Akber Hossain, MD of the bank tells Bangladesh Post
Ahammad Parvej Khan
Palli Sanchay Bank (PSB) is a specialised bank formed to mobilise different types of micro-savings of rural underprivileged people, maintain accounts of members of samitees, encourage them and family members for savings, provide basic loans on simple terms and make them financially self-reliant.
In conventional banking, those who got more assets are allowed to avail of more finances. In other words, those who have little or no assets are deprived of finance. As a result, more than half of the country people are deprived of financial service under the conventional banks because those are based on collateral. PSB is fully collateral-free.
Md. Akber Hossain, Managing Director of Palli Sanchay Bank told in an interview with Bangladesh Post. Following is the excerpts of the interview.
Bangladesh Post: First of all would you please define us the prime objectives of such Palli Sanchay Bank as a specialised Bank?
Akber Hossain: Palli Sanchay Bank was established with the profound intention of Prime Minister Sheikh Hasina to transact and maintain the micro-savings deposits, disburse loans without any collateral to poor, disburse SME loans and invest fund amongst the poor and disadvantage people of rural area. Its aim is to uphold all programmes and activities of One House One Farm project set by the government.
The bank was established through passing a bill in the Jatiya Sangsad and obtaining the approval from President. Palli Sanchay Bank Law, 2014 came into effect on August 31, 2014 through S.R.O No. 221/Law/2014 on August 30, 2016.
Bangladesh Post: In this connection, please let us know what are the basic differences of Palli Sanchay Bank with other conventional commercial banks of the country?
Akber Hossain: The operation of Palli Sanchay Bank is quite reverse of the conventional commercial banking methodology. PSB is the bank where the borrowers should not knock at, rather the bank goes to the doors of the poor and underprivileged people.
This is a specialised bank formed to cater specific needs and objectives. The bank was established to mobilize different types of micreo-savings of rural underprivileged people, maintain accounts of thousand of samitees, encourage their members and family members for savings, provide basic loans on simple terms and make them financially self-reliant. In conventional banking, those who got more assets avail of more finance. In other words, if you have little assets or nothing, you get nothing these. As a result, more than half of the country people are deprived of financial service through conventional banks which is based on collateral. PSB is fully collateral-free.
Conventional banks do not pay attention to what happens to the borrowers’ families. PSB pays a lot of attention to monitoring socio-economic development of the poorest.
This bank facilitates the members to build warehouses by giving loan for effective storage of their products and marketing. The bank is trying to develop skills of farmers in different income generating areas like poultry, fisheries, livestock, nursery and agriculture by providing necessary training. PSB is also working to materialize the dream of the government to establish hunger-free, poverty-free Bangladesh by creating opportunities for production-oriented activities, marketing and self-employment across the country through financing and build each and every house as a central focal point for economic development.
On contrary, the commercial banks are established with the prime objective of profit maximization. They are mainly engaged in hunting deposits and lending both in short and long term basis on industrial undertakings and in trade finance activities mainly in urban areas and also in international arena with profit motive. PSB branches are located in rurul areas. Conventional banks focus on men but PSB gives high priority to women. PSB works to raise stability of poor women and their families by giving them ownership of assets.
Bangladesh Post: Now please tell us about the current status of capital base, asset base, manpower and branch network of the bank.
Akber Hossain: As per the Palli Sanchay Bank Law, 2014, the shares of the bank are sold amongst the members of 40,215 samittees in 485 upazilas. As a result, the endowment of the rural population also acquires 01 (one) share of Tk 100 and thus become owner of the the bank. Authorised capital of the bank is Tk 1,000 crore and the initial paid-up capital is Tk 200 crore in which government owns 51 percent and the rest 49 percent belongs to the grass root people who are the members of the samittee, mostly women.
Bangladesh Post: How this bank contributes to achieve ‘zero poverty’ plan of the government? Do you think, the ratio of success, achievement so far is up to the mark?
Akber Hossain: You know that prime minister formally inaugurated 100 branches of Palli Sanchay Bank in 100 upazlla from Gonobhaban through video conferencing on June 22, 2016. Finance finister inaugurated the "Online Real-time Core Banking Function" on August 24, 2017. In the meantime, Bangladesh Bank issued license to open 485 branches in all 485 upazilas of the country. For which the rural people under samittee of One House One Farm project are able to make deposit and transact their hard-earned savings and avail of collateral-free loans without any hassle.
The bank’s objective is to ensure financial services to the poor, particularly women and the poorest to help them fight poverty. This is not the right time to evaluate the achievement of the bank. We believe this bank will be able to contribute significantly to achieve zero poverty plan of the government.
Bangladesh Post: Please tell us whether you face any hurdle or challenges in running the activities of this bank?
Akber Hossain: Recruitment and deployment of manpower at different levels and engaging them in the main stream of banking and mobilization of resources for accelerating micro-finance activities are big challenges now. PSB is trying to resolve the issues with due importance and priority. Conventional banking classified the poor as “not creditworthy”, but PSB pays special attention to even baggers as they come under One House One Farm project.
Bangladesh Post: We know that this specialised bank has some certain promises. Would you please elaborate them?
Akber Hossain: Promises of this bank are to provide a host of service to the poor and low income group of underprivileged rural people. These services are credits, mobilising savings, micro entrepreneur farming, agriculture loan and other income generating activities for poverty alleviation. PSB encourages the borrowers to adopt some goals in social, educational and health areas.
Bangladesh Post: Do you think that the micro-savings model of Prime Minister can bring about radical changes in country’s poverty scenario?
Akber Hossain: Micro savings model of prime minister can bring radical changes in the country’s poverty scenario through following activities:
1) To assist in the formation of capital through collection of small savings of underprivileged rural people through microfinance activities.
2) Enhancing competency through training, with the help of necessary loan assistance. Make the house a centre of productive activity and increase investment in the marginal level in the agricultural sector.
3) Ensuring empowerment of women by enhancing efficiency and capacity of entrepreneurs through training to implement the income generating programme.
4) Creating a group of human resources, ensuring integrated rural development, posing a positive role in poverty alleviation.
5) Involvement of the disadvantaged population in poverty alleviation activities in the combination of modern information technology, ensuring maximum utilisation of natural and human resources.
6) Implement the micro-savings model of prime minister and converting every house into a farm to improve the fate of the poor.
Bangladesh Post: Now please brief us about the credit system, interest rate and on-going products of the Palli Sanchay Bank.
Akber Hossain: Palli Sanchay Bank extends collateral-free credit among the members of the Somittee registered with the bank. The underprivileged village poor can easily get loan for the purpose of beef-fattening, agro-based small industries, milk-cow, cottage industries, fisheries, nursery, agro-industrial parts production, producing of high- valued vegetable and spices etc. The bank’s credit mission is to help the poor families to overcome poverty. It is targeted to the poor, particularly poor women.
All types of entrepreneurs’ flat interest rate would be 8%.
Ongoing loan products are small entrepreneur loan (maximum 10 thousand), medium entrepreneur loan (Tk 50,001- Tk 3.00 lakh), special entrepreneur loan (Tk. 3 lakh –Tk. 10 lakh), seasonal loan etc. Saving products of PSB are general savings, special savings, social security savings, student savings, term deposits, rural pension scheme, current deposit etc.
Bangladesh Post: Finally please tell us something about how your bank would be able to contribute to the economic growth of the country?
Akber Hossain: In this circumstances, provision of micro-finance/SME loan among the poor, both in rural and in urban areas, has been considered globally as an economic and social mechanism for self-employment with a view to increasing their income and improving their living standard. Through improvement in living condition and increase income level, PSB’s “micro-savings model” meets the financial need of the poor through access to finance at reasonable terms for enabling them enhance their skill and earn a better income. We presume the Palli Sanchay Bank may contribute significantly to economic growth of the country.
