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Developing agricultural markets on the chars

Two million people live on Bangladesh’s riverine islands, the chars, who due to their isolation lack all access to opportunities for economic development. Swisscontact recognizes the potential for agriculture and animal husbandry, developing business models that promote economic growth on the chars. Above all, this includes access to financial services for char inhabitants.

The chars, riverine islands that formed from sedimentation, are separated from the mainland seasonally or year-round. Due to the difficult geography, their inhabitants barely have access to appropriate services in health, education, agriculture, and finance. But river areas feature fertile soil and offer enormous potential for agriculture and animal husbandry.

Developing access to financial services

To microfinance institutions, households on the chars were of no interest until recently. This was due to the high operating costs and risks in providing credit. Char dwellers until recently could only borrow money either from local money lenders at a high interest rate, or only receive loans with long contract periods. In order to make effective investments, for example in useful plants or raising cattle, these farmer businesses need access to appropriate financial products.

The systemic approach of Making Markets Work for the Chars (M4C)

The M4C project negotiated with state and private banks with the goal of expanding their outreach. Microfinance institutions are receiving assistance in efforts to establish new branch offices in the river areas and to develop new products, for example seasonal agricultural credit. These financial institutes, equipped with adapted products and services for new clients, now work closely with actors in the agriculture value chain. In this way, they are gaining access to a new client segment that is opening new sources of income. Between 2014 and 2018, M4C was already working with five financial institutes. Seasonal agricultural loans worth 350 million BDT (around 4.2 million Swiss francs) have been disbursed to over 10,000 households.

Lessons Learned

M4C successfully tackled the challenges of microfinance in remote locations by linking specific target markets (location, client profile, and cash flows), developing appropriate loan products (periods, loan size, and rates), establishing efficient processes (identifying loan beneficiaries, credit disbursements, and repayments), and setting up seasonal plans (for target minimum loan recipients and payouts).

The project seeks sustainable impact through responsible and transparent access to customized financial services for disadvantaged groups.

Implemented by Swisscontact together with the Rural Development Academy (RDA), Making Markets Work for the Chars is a project mandated by the Agency for Development and Cooperation (SDC) and the Ministry of Local Government, Rural Development and Co-operatives in Bangladesh.

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