ADB gives $40m Loan to Boost Bangladesh Farm Incomes

Microfinance Focus, July 2, 2010: The Asian Development Bank (ADB) has announced a loan of $40 million for the Second Crop Diversification Project in Bangladesh to boost incomes for poor farmers and support the nation’s food security. The financial assistance will be used to support the development of high-value crops in 27 districts in the southwest and northwest of Bangladesh – including some of the poorest, least developed and most climate-vulnerable areas in the country.

The new project will build on the gains of an earlier ADB-assisted Northwest Crop Diversification Project. It will provide farmers in targeted districts with the latest in high-value crop production techniques, including “green” technologies for organic manure. The focus will be on crops with proven market demand, high profitability, and potential for commercialization, including fruits, vegetables, pulses, spices, cut flowers, potted plants and value-added agriproducts.

“Agriculture projects continue to be important for promoting social inclusiveness, particularly of women and ethnic minorities, and this initiative will benefit marginal, small and medium farmers in target areas, as well as generating employment opportunities for landless people,” said Jiangfeng Zhang, Senior Country Economist for ADB’s Bangladesh Resident Mission.

Over 75% of Bangladeshis are involved in agriculture, with rice the dominant crop. However, the country lacks sufficient supplies of fruit and other nutritious foods, forcing it to rely on pricey imports. In response, the government has put in place an agriculture development strategy to diversify crops, ensuring national food self-sufficiency and increased incomes for farmers.

ADB’s loan, which will finance 87% of the total project cost of $45.8 million, has a 32-year term with an 8-year grace period. Interest during the grace period is set at 1% per annum, rising to 1.5% for the rest of the term. The government is extending $5.42 million, with farm communities extending around $390,000 equivalent. The Department of Agricultural Extension and Bangladesh Bank are the executing agencies for the project, which is expected to be completed by June 2016.

With Bangladesh highly susceptible to extreme weather events due to its low-lying position along the Bay of Bengal, the new project will pilot test climate-resilient varieties of crops in drought and flood-prone areas. Training in the production and post-harvest processing and marketing of high-value crops will be provided equally to men and women, and to reduce post-harvest losses and improve produce quality, the project will support investments in low-cost community-based infrastructure such as collection and post-harvest handling centers, and small scale cool, cold and dry storage facilities.

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