Recently BRAC Bank has successfully introduced a new product - Krishak Card or a card designed especially for the farmers' use. This is nothing new to the people of Bangladesh. From time to time the banking sector has been coming up with different products for the lower income group of people. In particular, the Krishi Bank has been providing agriculture loans to the farmers for a long time.

But when it comes to card business, the Krishak Card has added a new dimension to it and it is much younger than other banking products in Bangladesh. Previously, banks used to design credit cards for high-profile businessmen, top executives of corporate bodies or professional bodies with high net worth. So there was a perception that credit card was only for the rich people or for the upper class people of the society.

Multinational banks first introduced credit card in Bangladesh. American Express, Grindlays Bank Plc and the then BCCI were the pioneers in introducing card business in Bangladesh. Of all the products then, holding an American Express card was deemed a symbol of status. Businesspeople used to show Express cards as a mark of high net worth of a business magnet. So these cards were only for the people in the upper class or upper middle class bracket. The card brands that dominated the market then were Visa Master card, American Express and Thomas Cook. Later on, private banks started offering cards to all sections of people, even to the newly-appointed junior executives of companies or small businessmen with stable incomes.

The main advantage of credit card is it allows a certain amount of credit facility without any security and if the credit amount availed is settled by the bill date, then no interest is required to be paid.

Gradually the card business is increasing in our country as in other developed countries. But still it is within the reach of only a section of urban people, not the mass people.

The recent initiative of BRAC Bank is praiseworthy in consideration of the things involved. First of all, they have chosen a segment that involves risks in terms of security of the credit and the income level needed for determining the credit worthiness of the farmers, whose income level fluctuates along with the uncertain production and market prices of their produce. Secondly, in business no one likes to become a pioneer in such a risky area with a new product. But BRAC Bank has come forward with a product that is designed for the farmers' use. The Krishak Card was first launched in Jhenidah in 2011 and this time they have issued 200 cards for the farmers of Dinajpur district which is known for rice cultivation. The farmers will use the cards to borrow funds and start repayment after selling their produce.

There are many aspects of such a dynamic product. One is banking products have become very limited. Competition in the banking arena has increased many times and is also increasing day by day with some new banks going to enter the existing market. Naturally, the competitive environment needs the existing banks to redesign their products and services and explore new areas of markets for their products, such as the new and comparatively unexplored market of rural banking.

Microcredit extended to the poor people has already gained worldwide appreciation. Still full-fledged banking services for the poor people are absent or in a very nascent stage. The BRAC Bank's launch of modern banking products like card service to farmers deserves appreciation. First of all, the system allows farmers' access to credit without security, as it is difficult for a farmer to get a loan by providing any collateral against it. The loan procedure is another hassle for the farmers as most of them are not aware about how to apply for a loan and get it and sometimes the lengthy loan procedure does not allow them to use the fund for the intended purpose. So they spend the loans for their personal purposes and later on become loan defaulters. But by using credit cards they can buy necessary materials such as seeds, fertilisers and other things as required instantly without any documentation or paper work. This will offer the farmers an easy access to instant fund and make farming more productive and easier for them.

Definitely the aspects discussed are the bright side of the said card, but as usual there are some problems with credit card for both sides - the company and the users. As we know, the interest rate of credit card on an unpaid amount is as high as 30 per cent. So, if it remains same in case of Krishak card, then surely it will be difficult for the farmers to borrow fund at such a high rate. Farmers are not habituated to use such loan facilities. So they cannot plan how to repay an instalment or a full amount.

Moreover, the agriculture sector is rife with uncertainties. Crop failure is a common phenomenon even in developed countries, because no one has got any control over the weather conditions. So, if anything goes wrong, how will they settle their dues? One option is a normal credit shield being applied to normal credit cards. But once again it is going to increase the repayment amount on the borrowed money and for marginal farmers it is difficult to repay.

News: The Daily Financial Express/Bangladesh/8th-Dec-12