The World Bank

Document of The WorldBank

FOR OFFICIAL USE ONLY X pr v Public Disclosure Authorized Report No.3348c-BD Public Disclosure Authorized

BANGLADESH

AGRICULTURALCREDIT PROJECT

STAFF APPRAISAL REPORT Public Disclosure Authorized

April 17, 1981 Public Disclosure Authorized Agriculture D Division South Asia Projects Department

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS

The Bangladesh Taka (Tk) is fixed in relation to a basket of reference currencies, with the Pound Sterling serving as inter- vention currency. On February 26, 1981, the exchange rate was set at Tk 37.10 buying and Tk 37.20 selling per Pound Sterling. Depending on exchange rate movements between Sterling and the US Dollar, the Taka/Dollar cross rate is subject to change. For the past five months, this rate has fluctuated at levels slightly above Tk 16/US$. Through- out this report, the rates shown below have been used:

US$ = Tk 16.0 Tk 1 = US$0.0625 Tk 1 million = US$62,500

WEIGHTS AND MEASURES

1 square mile (sq mi) = 259 hectares 1 acre (ac) = 0.405 hectares 1 foot (ft) = 30.5 centimeters 1 maund (md) = 37.3 kilograms I ton (ton) = 27.2 maunds 1 cubic foot per second (cusec) = 0.0283 cubic meters per second 1 imperial gallon = 4.545 liters

ABBREVIATIONS AND ACRONY4S

ADB - Asian Development Bank BADC - Bangladesh Agricultural Development Corporation BB - Bangladesh Bank BKB - Bangladesh Krishi Bank BSBL - Bangladesh Samabaya Bank Ltd CB - Commercial Bank(s) DCCB - District Central Cooperative Bank(s) DTW - Deep Tubewell(s) GOB - Government of Bangladesh HYV - High Yielding Varieties IRDP - Integrated Rural Development Program KSS - Krishi Samabaya Samiti (Village Credit Society) STW - Shallow Tubewell(s) TCCA - Thana Central Cooperative Association

FISCAL YEAR (FY)

July 1 - June 30 FOR OFFICIAL USE ONLY

GLOSSARY

Description of Rice Crops

B. aus - broadcast aus - mostly broadcast sown in March-April and harvested July-August

T. aus - transplanted aus - transplanted in March-April and harvested early July-August

B. aman - broadcast aman - deep water rice - broadcast sown March-April and harvested November-December

T. aman - transplanted aman - the main crop - transplanted July-Septemberand harvested November-January

Boro - irrigated transplanted crop - transplanted December- January and harvested May-June

Thisdiumnt hasa restrictedduiWbution at maybe used by recipientsonly in tbe performance of thi odicialduties Its contentsmay not oterwise be disckiesdwithout World Bankauthorization. I BANGLADESH

AGRICULTURAL CREDIT PROJECT

Table of Contents

Page No.

I. THE AGRICULTURAL SECTOR ...... 1 General ...... 1...... Potential and Constraints ...... 1...... Production Trends ...... 2 Irrigation ...... 2

II. CREDIT INSTITUTIONS ...... 4 Credit Operations ...... 4 Bangladesh Bank ...... 5 Bangladesh Krishi Bank ...... 6 Commercial Banks ...... 7 Cooperative Credit ...... 9

III. THE PROJECT AREA ...... 11 General ...... 11 Climate, Topography, Soils ...... 11 Water Resources and Drainage ...... 12 Farm Size and Land Tenure ...... 12 Land Use and Agricultural Production ...... 13 Transport Infrastructure ...... 14 Inputs ...... 14 Electricity Network and Diesel Supply ...... 15 Agricultural Credit ...... 15 Agricultural Extension and Research ...... 16 Marketing, Storage and Processing ...... 16

IV. THE PROJECT ...... 17 Project Genesis ...... 17 Project Summary ...... 17 Detailed Features ...... 18 Environmental Aspects ...... 22 Project Phasing ...... 23

V. COST ESTIMATES, FINANCING, PROCUREMENT AND DISBURSEMENTS ...... 23 Cost Estimate ...... 23 Financing ...... 24 Procurement ...... 25 Disbursements ...... 26

This report is based on the findings of the appraisal mission consisting of Messrs. G. Stern, and C. Hachero (IDA) and H. Babcock, P. Kotaiah and G. Nelson (Consultants), that visited Bangladesh during October/November 1980. - ii -

Table of Contents (continued)

Page No.

VI. PROJECT ORGANIZATION AND IMPLEMENTATION ...... 26 Bangladesh Bank Project Department ...... 26 Lending Operations ...... 27 Proposals for Restructuring Cooperative Banking ...... 29 Proposals for Improving TCCA/KSS Cooperatives Operations ...... 30 Lending Terms and Conditions ...... 31 Training ...... 33 The Role of BADC ...... 33 Project Coordination ...... 33 Tubewell Spacing and Groundwater Monitoring ...... 33 Reporting Requirements and Evaluation ...... 34 Accounts and Audits ...... 35

VII. PRODUCTION MARKETING, PRICES AND FINANCIAL PROJECTIONS .. 35 Production ...... 35 Marketing and Prices ...... 36 Financial Projections ...... 37

VIII. BENEFITS AND ECONOMIC EVALUATION ...... 38 Benefits ...... 38 Economic Evaluation ...... 38 Beneficiaries...... 39 Risks ...... 40

IX. RECOMMENDATIONS ...... 40

Schedule A - Lending Terms and Conditions Schedule B - Agreed List of Diesel Engine Makes for Sale to Project Borrowers - iii -

Table of Contents (continued)

ANNEX 1 - Credit Institutions Table I - Recovery Performance of Credit Institutions Table 2 - Bangladesh Krishi Bank Balance Sheets for Fiscal Years 1975/76-1979/80 Table 3 - Bangladesh Krishi Bank Profit and Loss Statement-- Fiscal Year 1975/76-1979/80 Table 4 - Consolidated Balance Sheet - Sonali, Janata and Agrani Banks Table 5 - Consolidated Profit and Loss Statement Sonali, Janata and Agrani Banks Table 6 - Operation of IRDP Cooperatives Table 7 - Bangladesh Samabaya Bank Ltd., Balance Sheets 1975/76- 1979/80 Table 8 - Bangladesh Samabaya Bank Ltd., Profit and Loss Statement 1975/76-1979/80 Table 9 - KSS Merit Criteria

ANNEX 2 - NW Region Data Table 1 - Land Utilization - NW Region Table 2 - Production of Major Crops

ANNEX 3 - Cost Tables Table 1 - Project Cost Table 2 - Shallow Tubewell Cost Table 3 - Workshops Tools and Equipment Cost

ANNEX 4 - Disbursement Schedule

ANNEX 5 - Bangladesh Bank Project Department - Functions of Project Implementation Unit

ANNEX 6 - Guidelines for Loan Accounting for Loan Recovery Reporting Systems

ANNEX 7 - Cropping Patterns, Crop Production, Prices and Financial Analysis Table 1 - Cropping Patterns Table 2 - Present Average Yields and Future Yields in the Project Area Table 3 - Present and Future Crop Yields, Area and Production Table 4 - Financial and Economic Prices Table 5 - Crop Production Costs Per Acre at Financial Prices Table 6 - Five Acres Farm Model Projected Income and Financial Returns Table 7 - Ten Acres Farm Model Projected Income and Financial Returns Table 8 - Five Acres Farm Model Projected Income and Financial Returns Table 9 - Ten Acres Farm Model Projected Income and Financial Returns Table 10 - Financial Rates of Return and Switching Values

ANNEX 8 - Economic Analysis Table 1 - Prices for Economic Analysis Traded Commodities, 1982-1990 Average Table 2 - Crop Production Costs at Economic Prices Table 3 - Economic Analysis - Cost and Benefit Streams Table 4 - Economic Rates of Return and Switching Values

ANNEX 9 - Related Documents and Data Available in the Project Files - iv -

Table of Contents (continued)

LIST OF CHARTS

Chart No. WB 22503 - Project Organizationand Credit Flow

Chart No. WB 22504 - Bangladesh Bank Project Department Proposed OrganizationChart

Chart No. WB 22505 - ImplementationSchedule

LIST OF MAPS

IBRD 15591R - Tubewell Suitabilityand Banking System

TU1on Si9R - Land Use BANGLADESH

AGRICULTURAL CREDIT PROJECT

I. THE AGRICULTURAL SECTOR

General

1.01 Bangladesh, with an area of 55,000 square miles and a population of about 92 million, is among the most densely populated countries of the world and presents a complex development problem. The population is poor (per capita income about US$90), overcrowded (1,550 per sq mile), growing at 2.7% per annum, in many cases unemployed and largely illiterate (about 75%). Apart from agriculture, the country has few natural resources and the Government of Bangladesh (GOB) gives priority to agricultural development as the means to benefit the largest number of people.

1.02 Agriculture dominates the Bangladesh economy, accounting for 57% of GDP, 75% of all employment and directly or indirectly, over 80% of the country's exports. Out of 35 H1 ac about 22.5 M ac are under cultivation at a cropping intensity of about 135%. Rice is by far the most important crop and accounts for over 80% of the cultivated area; jute, the principal export and industrial raw material crop, for 6% and a variety of other crops such as wheat, pulses, oilseeds, sugarcane and vegetables for the balance. The dominance of rice is due to the flat topography of the country, heavy monsoon rains and river flooding, which saturate most soils during the six months rainy season, a condition well suited for rice cultivation and tolerated by some jute varieties but unsuitable for most other crops.

Potential and Constraints

1.03 There is high potential for increasing agricultural production in Bangladesh because of fertile soils; the climate, which is suitable for year round cropping; and above all abundant and as yet hardly exploited groundwater resources. However, there are also serious contraints to agricultural development such as scarcity of cultivable land, limited potential of part of the cultivated land, climatic hazards, lack of irrigation facilities, and deficient transportation for moving farm inputs and produce. The major constraint is the heavy pressure of population on land. Most land holdings in Bangladesh are small and fragmented--a typical holding being about two acres split into six plots. This constitutes an obstacle to efficient farm management and makes the organization of cooperative irrigation systems difficult. An additional constraint is the agricultural tenancy arrangements, under which about 30% of Bangladesh farmers operate. Because of the customary rental arrangements, the tenant is normally expected to provide all of the inputs, but receives only about half of the crop and has no right of occupancy. Under such an arrangement there is reduced incentive to develop land for irrigation or to adopt improved farming practices.

1.04 Farmers in Bangladesh are receptive to proven innovations. Their efforts have been, however, handicapped by inadequate amounts of inputs such as seeds, fertilizers and pesticides on the one hand and inadequate technical advice on the other. GOB is addressing these problems by encouraging the -2- private sector to take a much greater part in inputs distribution, expanding inputs storage, expanding seed production; 1/ and by its efforts to improve extension and research services. 2/ As a consequence, in the last two to three years, the situation has much improved.

Production Trends

1.05 Foodgrain self-sufficiency has been the main government objective since preindependence days, and remains the cornerstone of GOB policy today. However, the objective has been elusive. Foodgrain imports, while down from the peak 2.8 million tons following the combined disruption of the war of liberation and bad drought in 1972/73, have still averaged 1.3 M tons over the last five years. Production has fluctuated with weather conditions but peaks have been rising from 11.3M tons in 1969/70, to 12.6 M tons in 1975/76, to 13.1 M tons in 1977/78 and the current crop is estimated to break all records and may exceed 15 M tons.

1.06 GOB policy of emphasizing use of inputs such as seeds, fertilizers, pesticides and irrigation and of supporting research and extension are beginning to pay dividends. Latest high yielding varieties (HYV) of rice and wheat released by research stations are finding increasing acceptance by farmers. Progress in promoting improved farming during the last decade has been encouraging and includes increase of almost 1 million acres under modern irrigation methods; growth in fertilizer consumption from about 300,000 tons per annum to almost 1 M tons (mainly during the last five years) and spread of rice and wheat HYV from less than 1 M acres to about 3.5 M acres.

1.07 There have also been disappointments that have caused the slower than targeted increase in production, particularly the relatively modest increase in production from rainfed rice (about 85% of the paddy area and 75% of production), and the slower than anticipated development of irrigation. GOB in its Second Five-Year Plan (1980/81-1984/85) is determined to attain foodgrain self-sufficiency and the target is a production of 18 million tons foodgrain per annum by the end of the plan period. The Bank has assisted GOB in drawing up the Medium-Term Foodgrain Production Plan which indicates development activities needed to attain the production target. Accelerated development of privately owned irrigation wells, to utilize the abundant groundwater resources, is the most important part of the plan. Because of all pervasive poverty in rural areas, outright purchase of wells and equipment would be possible for only relatively few farmers and the Bank agrees with GOB that adequate credit would be necessary for rapid spread of minor irrigation. Provision of such credit for accelerating minor irrigation and improvement of credit institutions for that purpose would be the main objectives of the project.

Irrigation

1.08 Because of abundant rainfall and fertile soils, it was only in the 1950s that food requirements of the rapidly increasing population outstripped

1/ Supported by Credit 410-BD and a second project under appraisal.

2/ Supported by Credit 729-BD. - 3 -

supplies and the possibilities of intensifying agricultural production by irrigation were given prominence. At that time the Government realized that irrigation would allow crop production during the dry season, when most land was fallow and would help to ensure good yields during droughts in the rainy season.

1.09 First government efforts to develop irrigation focussed on large- scale gravity schemes. These proved costly and slow maturing and the strategy then swung to relatively cheap and individually small (1-2 cusec) low lift pump schemes based on surface water resources. Starting from scratch, in the late 1950s the program has now extended to some 40,000 pumps irrigating an estimated 1.3 million acres and is approaching the limit of available dry season surface water resources. Most low lift pumps are owned and maintained by the Bangladesh Agricultural Development Corporation (BADC) and rented to farmers. Five IDA projects (Credits 340, 542, 605, 725, and 990) support low lift pump development.

1.10 Large-scale groundwater development started in the late 1960s and to date has hardly made any impact on groundwater resources, that must be among the richest in the world. Most of Bangladesh consists of deep, uncon- solidated alluvium which contains water bearing sands. The resultant aquifer is annually recharged by the heavy rains and by flooding and is virtually inexhaustible. In many areas groundwater level reaches the surface during the rains and then rejects further recharge and even in the dry weather does not sink more than 10-20 ft below ground level. Such aquifers are ideal for exploitation by hand pumps or shallow tubewells (STW). In some parts of the country, groundwater levels are deeper and require more costly deep tubewells (DTW) for irrigation pumping. Apart from the coastal belt where groundwater may be saline and small areas of nonalluvial rock, irrigation coverage from groundwater, of the greater part of the land not already served by surface sources, should be possible. Intensified cropping, based on groundwater development, has been given increasing priority in recent years.

1.11 Until four or five years ago, groundwater development emphasis was on DTW, typically two cusec units capable of irrigating over 100 acres. Construction requires technically skilled supervision, which was mainly provided by BADC. About 11,000 DTW have been installed and the program has been supported by IDA Credit 341-BD, which financed 3,000 of the DTW. Pro- gress of the IDA project was slow and beset by procurement and construction problems. Efficient utilization requires formation of sizeable farmers groups which is also a slow process. As with low lift pumps, DTW are mostly owned and maintained by BADC at this time and rented at relatively nominal rates to farmers groups that operate them. However GOB has recently introduced a policy to sell both types of facilities to farmers.

1.12 Development of STW started in the mid 1970s and is being supported by two IDA projects Credit 724 and part of Credit 631. Typically STW are about 0.5-0.75 cusec units, easily and quickly installed by local drillers using simple equipment. About 20,000 STW have been installed; about half each by BADC and the Bangladesh Krishi Bank (BKB). While STW are privately owned either by individuals or small farmer groups, procurement and installation has so far -4 - been centrally organized by the two agencies, which has led to considerable delays. However, as a result of past STW programs, considerable farmers' demand has been created, numerous STW drilling contractors are available and there is a network of small workshops and some village mechanics to cater for repairs, particularly for STW installed by BKB. For the rest, BADC still provides spare part and repair services from workshops that also cater for low lift pump and DTW maintenance. These services as well as procurement and construction of STW are proving increasingly burdensome to the Corporation. In the project, equipment supplies and STW repairs would be handled by the private sector.

1.13 Development of hand tubewells, each costing only about $100 and capable of irrigating 1/2 to 1 acre of land, and thus most suitable for very small farms, is the most recent groundwater program. About 120,000 have been installed to date and IDA is processing a project for providing a further 180,000 to Bangladesh.

II. CREDIT INSTITUTIONS

Credit Operations

2.01 Institutional lending for agriculture is directed and coordinated by the Bangladesh Bank (BB), the country's central bank (para 2.05) and channeled through cooperatives, BKB and the six nationalized commercial banks (CB). Lending, which was only for Tk 150 M per annum at independence, has expanded rapidly, particularly during the last four years when it rose from Tk 1,060 M in 1976/77 to Tk 2,684 M in 1979/80. Important features in development of the rural lending program were expansion of the new TCCA 1/ / KSS 2/ cooperative system (para 2.20); expansion of BKB; involvement of CB in rural lending in 1973 and rapid expansion of their rural branches; and introduction in 1977, of the Tk 100 crore 3/ scheme for crop production credit to be executed by BKB and CB. The annual lending program for each institution is drawn up by BB, which also provides refinance as required. In 1979/80 for instance, BB refinanced about two thirds of total rural credit disbursements.

2.02 With almost 70,000 village cooperative societies, more than 3,400 CB branches and 414 (at September 30, 1980) BKB branches, Bangladesh has an excellent credit outlet network. Over the last four years, BKB and CB have more than doubled the number of their branches, many of which are now not covering costs. While there are plans for opening more branches, GOB and BB are taking stock and considering rationalization by branch mergers. Lending achievements have been below target each year, particularly of the 100 crore program, which raises questions about credit demand and the need for so dense

1/ Thana Central Cooperative Assoc.ation.

2/ Krishi Samabaya Samiti (Village Credit Society).

3/ One crore = 10 million. a credit network. However, demand for purchased inputs and hence for crop production credit remains limited due to lack of irrigation facilities, without which, heavy investment for inputs is often not profitable. The project would increase the supply of minor irrigation facilities and this would help to build up demand for credit and thereby improve profitability of the rural banking system. Fast expansion of credit institutions has resulted in a shortage of trained bank staff. All agencies are strengthening their training facilities and the project would also assist to expand training programs (para 4.13).

2.03 There are several aspects of loan recovery performance that require attention. There is no uniform recovery reporting system and therefore no basis for accurate comparison of loan recovery performance. BB will introduce a suitable system (para 6.09). The older institutions including BKB and traditional cooperatives are burdened with a legacy of old overdues, some dating to preindependence that obscure their recent improved collection efforts and would need special treatment. CB repayment collection record ranges from 37% to 72% of demand 1/ (Annex 1, Table 1). Part of their overdues problem may stem from adverse climate and poor crops during 1978/79 and part from early lending under the 100 crore scheme, with inadequate staff and having to rely on local government personnel for selection of borrowers. CB's staffing position has now improved. TCCA/KSS practice a strict lending discipline that disqualifies KSS from lending unless recovery is 80% for current lending and 100% for previous lending. Consequently, their recovery record is quite good, over 60% during the last two years. While TCCA/KSS borrowers may often be unable to pay very punctually, overdue loan installments more than three years old are negligible. In general, recovery efforts of recent lending appear to have been reasonably successful and overdues (excluding the older overdues referred to above) are in the nature of delayed repayments rather than potential bad debts. Never- theless, further improvement of collection is necessary and is described in para 6.09. On the whole, the credit system with strengthening described in Chapter VI is suitable for implementing the project. Main agencies are described below.

Bangladesh Bank

2.04 The Bangladesh Bank established in 1972 is the central bank. It is managed by a GOB appointed governor, assisted by a deputy governor, three executive directors, an economic advisor and an officer on special duty with the rank of deputy governor. BB has five main departments--Banking Control, Exchange Control, Agricultural Credit, Research and Statistics and the recently established Projects Department that would implement the project. Its capital of Tk 30 M is fully owned by GOB. BB in 1979/80 made a net profit of Tk 1,010.5 M.

2.05 Apart from performing all central banking functions, BB through its Agricultural Credit Department draws up the annual credit program, devises new credit schemes (such as the 100 crore scheme), advises credit institutions on

1/ Repayments of capital and interest fallen due during the year plus capital and interest repayments due at the beginning of the year. -6- rural credit matters, inspects CB, BKB branches and major cooperatives engaged in rural credit operations and channels refinance for rural lending to them. The Agricultural Credit Department also collects statistics on agricultural lending. The Department is performing its functions competently.

2.06 Based on recommendations of consultants employed under IDA assistance to review agricultural credit practices and to propose improvements and investment opportunities, BB, in November 1979, established the Projects Department for identifying, preparing and implementing long-term credit schemes. The consultant had suggested that a unit for long-term credit should be set up in the Agricultural Credit Department, but BB considered that rapid expansion of long-term agricultural credit warranted a separate department. The Department is headed by the Officer on Special Duty and has nine professional officers. It has been closely associated with preparation of this project and has also prepared a shrimp rearing and banana cultivation scheme and is preparing several other schemes. Preparation documents of those schemes show that more experience in technical and financial evaluation is needed by the Department. Proposals for strengthening the Project Department are described in paras 6.01 through 6.05.

Bangladesh Krishi Bank

2.07 The Bangladesh Krishi Bank, established in 1973 as an autonomous GOB owned bank is the successor of the local division of the Agricultural Development Bank of Pakistan. It is now the largest single source of institutional credit for agriculture, and in 1979/80 accounted for 53% of institutional lending to agriculture. Its lending volume increased eightfold over the last six years from Tk 176 M in 1974/75 to Tk 1,415 H1 in 1979/80. During this time BKB benefitted considerably from its association with the Asian Development Bank (ADB), including technical assistance for a range of managerial and technical subjects which is still continuing. BKB operates through 18 regional offices and 414 branches. Further branch expansion is contemplated, but because only 204 branches covered their costs in 1979/80, such expansion requires caution. The Managing Director, who is Chairman of the seven member GOB appointed Board, is an experienced professional banker and heads a staff of over 5,000. Senior staff all have long experience in agricultural banking. To cater for training new staff employed as a result of the recent fast expansion, BKB has been or is in the process of establishing four training centers, including one at Bogra in the project area. BKB has a detailed loan manual for guidance of its staff and branch managers are authorized to approve STW loans up to Tk 24,000 and other loans up to Tk 5,000. To support its STW lending, BKB has established an engineerrng department which is being further strengthened.

2.08 Total assets increased from Tk 811 M in 1975/76 to Tk 2,960 M in 1979/80 while net profits fluctuated between Tk 17 M in 1975/76 and Tk 32.0 M in 1979/80 (Annex 1, Tables 2 and 3). Because borrowing from GOB and BB had increased fourfold, from Tk 406 M in 1975/76 to Tk 1,742 M in 1979/80, GOB almost doubled BKB's paid up capital from Tk 120 M to Tk 220 M. In view of further proposed expansion, GOB will increase paid up capital by a further Tk 160 M over four years, so that BKB would have a satisfactory capital base for future lending. BKB has not fully complied with ADB's request to provide -7 -.

an annual allocation equal to 2% of loan disbursement for bad debt reserves, but GOB has converted part of its past loans into a contingency reserve to suppiieti)'LL BDLl provision for bad and doubLful accounts.

2.09 Loan recovery has improved steadily from 38% in 1975/76 to 57% in 1979/80, reflecting better staffing and management, resulting in part from ADB assistance. BKB is making efforts to improve collection further and retirement of some of the oldest debts should be considered. While collection performance is not accurately recorded by lending purposes, there are indications that recovery of early STW lending is less than the average recovery rate, due to initially inadequate appraisal and follow up. Both of these features have improved considerably in recent years.

2.10 BKB is expected to play a leading role in the project and is well equipped to do so. Points that will need watching are adequacy of interest spread to allow continued profitable operations; expansion program to ensure that BKB does not overstrain its resources; and further improvement of loan collection efforts.

Commercial Banks

2.11 General. The six nationalized CB--Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, Pubali Bank and Uttara Bank--were established in December 1971, at the time of independence of Bangladesh, from ten banks operating in the country at that time. Each one has management vested in a GOB appointed seven man board with representation from the Ministry of Finance, Ministry of Commerce and BB and is staffed by competent bankers. Since they are fully government-owned, they have been able to operate with a small amount of paid in capital and a resulting high debt equity ratio; up to 119:1. To support further large-scale expansion of operations, consideration may need to be given to increasing CB's equity. The first three are the largest of the CB with total assets of Tk 39,726.0 M for fiscal year ending 1979/80. Their branches represent 68% of all CB branches in the country. Because of their bigger resource and staffing base, they would be the only CB to participate in the project initially. They have participated in the First and Second Small-Scale Industries Projects (Credits 353-BD and 285-BD) and are helping to implement the recently agreed Third Small-Scale Industries Project (Credit 1065-BD). For purposes of planning the 100 crore program, BB appointed each bank as lead bank to a number of unions 1/ in which they would be responsible for developing agricultural lending. To date, agricultural lending by CB remains small, representing 22% of total agricultural lending in Bangladesh and less than 3% of CB total lending.

2.12 Sonali Bank - is the largest CB in Bangladesh with most experience in agricultural lending, including refinance for TCCA/KSS lending and for Jute Associations under the Jute Project (Credit 765-BD); and direct lending, virtually all short term, for the 100 crore program and for a variety of purposes. Sonali is also participating in the Shallow Tubewells Project (Credit 724-BD) both for refinancing TCCA/KSS loans and for direct lending but, up to November 1980, had processed very few STW loans. Total agricultural lending in 1979/80 reached Tk 512 M which included Tk 206 M refinancing for TCCA/KSS.

1/ Administrative subdivision. 2.13 Sonali operates through 917 branches (63u rural) and has established a rural credit department with a 28 man professional staff at head office, headed by a deputy general manager. Field staff consists of 950 krishi (agricultural) clerks--one per union for which Sonali is lead bank--supervised by 37 agricultural graduates and 60 farm technologists (diploma holders) and is adequate for present level of business. Sonali has excellent training facilities, but agriculture has hardly featured in the training programs to date.

2.14 Sonali's total assets increased from Tk 8,965 M to Tk 17,595 M (Annex 1, Table 4) between 1976/77 and 1978/79, while deposits grew from Tk 4,661 M to Tk 8,388 M over the same period. In 1978/79 total income was Tk 611 M and net profits amounted to Tk 96 M (Annex 1, Table 5). While profitable overall, 55% of branches (mostly newly established) showed losses. Sonali has been most successful of the CB in recovering agricultural loans with 72% collection reported for 1979/80.

2.15 Janata Bank - is the second largest CB and operates through 729 branches (September 30, 1980) of which 483 are rural. Agricultural lending amounted to Tk 205 M during 1979/80 predominantly for loans under the 100 crore scheme. Janata does not have an agricultural credit department, but instead has a rural credit division in its loans department. The division is headed by an assistant general manager and has a staff of 11 professionals at headquarters. Field staff consists of 762 rural credit assistants, one for each lead bank union, which is adequate for the present level of business.

2.16 Total assets stood at Tk 14,446 M at December 31, 1979 (Annex 1, Table 4) and deposits amounted to Tk 6,628 M. Total income for 1978/79 was Tk 725 M resulting in a net profit of Tk 96 M (Annex 1, Table 5). As with Sonali, while overall profit was considerable, 71% of the branches showed losses. Agricultural loan recovery has been only fair at 53% for 1979/80. Relatively high overdues could be the result of an expanding loan portfolio or the after effects of the 1978/79 drought. Janata is making efforts to improve recoveries.

2.17 Agrani Bank - is the third largest CB and operates through 694 branches (September 30, 1980) of which 459 were rural. Like Janata, its agricultural credit division forms part of its loans department. Headed by an assistant general manager with an 11 man professional staff at headquarters, agricultural credit field staff consists of 15 rural credit officers who supervise 350 rural credit assistants. Total agricultural lending was only Tk 87 M1 for the same purposes as Janata. Present staff would be adequate to sustain a higher agricultural lending level. Agrani also has staff training facilities that, as with the other two banks have concentrated mainly on general banking training.

2.18 In 1978/79, total assets stood at Tk 7,685 M (Annex 1, Table 4) and are rather lower per branch than Sonali and Janata. Income totalled Tk 353 M, of which net profit was Tk 46 M (Annex 1, Table 5). Recovery of agricultural loans has not been satisfactory and has deteriorated each year to 37% in 1979/80. Therefore, as a condition of participating in project lending, Agrani would implement a loan recovery program, satisfactory to BB and the Association. -9-

Cooperative Credit

2.19 General. At present, two cooperati.re systems operate i- Bar½lpdesh, both involved in agricultural credit operations--the traditional system consisting of the Bangladesh Samabaya Bank Ltd (BSBL) as apex financing 16 Land Mortgage Banks, 12 Central Sugarcane Growers Societies and 62 District Central Cooperative Banks (DCCB), to which about 30,000 village and union multipurpose societies are affiliated. The TCCA/KSS (para 2.20) is of more recent origin and was, until 1973, refinanced by BSBL and since then, because of BSBL's resource constraint, by Sonali Bank. GOB guarantees 30% of loans by Sonali to TCCA. The two systems have existed in parallel, to some extent to each others detriment. Recently GOB decided that the two systems should merge and that all primary societies should become KSS and affiliate with TCCA and that BSBL should become the apex bank of the unified system. Implications are discussed in para 6.10. The two cooperative systems are briefly described below.

2.20 TCCA/KSS. The TCCA/KSS system is based on a model developed by the Bangladesh Academy for Rural Development at Comilla. lMain objectives are to form a KSS of 40-60 farmers in every village and to federate KSS at the thana level into a TCCA. KSS should collect thrift deposits, introduce group management of irrigation equipment and provide regular training, institutional credit and at a later stage possibly inputs and marketing services. Adopted after independence as national program, the system spread rapidly and now covers 267 thanas and comprises almost 40,000 KSS with 1.3 M members. Capital formation (savings and shares) stands at Tk 92 M. Lending, almost entirely short term, also expanded rapidly from Tk 45 M in 1975/76 to Tk 205 M in 1979/80, (Annex 1, Table 6) despite much higher short-term loan interest rate--17.5%--than that charged by other institutions--up to 12%. However, as explained below (para 2.22), TCCA/KSS development would have been even greater if interest rates had been more in line with those of other banks and if lending criteria and procedures had been less restrictive. As already indicated (para 2.03), loan recovery has been quite good, to date. Capital and savings more than cover overdues, and were not less than 50% of annual borrowing compared to other institutions that range from 9:1 for BKB to over 100:1 for some CB. Lack of irrigation equipment has been a major constraint to credit business expansion, so that the project would help development of TCCA/KSS cooperatives greatly. The cooperatives are participating in the Shallow Tubewell Project (Credit 724-BD) and since 1979/80 have started financing medium and long-term credit. Early indications are that KSS groups tend to achieve better STW utilization than other owners.

2.21 To support TCCA/KSS Cooperatives, GOB established the Integrated Rural Development Program (IRDP) with headquarters at Dacca and district offices. GOB through IRDP supports TCCA financially at a rate of Tk 850-1,000 per constituent KSS, which helps to pay training costs and the cost of two or three senior staff per TCCA. Recent surveys indicate that TCCA should become financially self-sufficient about six years after formation. IRDP has introduced a grading system--Classes A to E--for KSS, based on membership coverage of the village, and savings and share capital contribution, borrowing and repayment performance and training attendance of members, which is illustrated on Table 9 of Annex 1. Only A and B class cooperatives with 80% and 60% grading in most categories, including loan recovery, would participate in the - 10 - project. One weakness at present is delay in auditing accounts by the Coopera- tives Department which would need to be improved (para 6.26). However, on the whole, TCCA/KSS has proved itself a reliable credit channel. In fact, because of demonstrated ability to reach the large number of smallholders, and initiate farmers group formation, which would be necessary for STW development in view of small farm size and fragmentation of holdings, TCCA/KSS cooperatives are expected to play a major role in the project.

2.22 GOB and IDA have recently conducted a joint review of TCCA/KSS cooperatives, which has identified major constraints to the development of these cooperatives. While increase in KSS membership and lending has been reasonable, the higher interest rate to final borrowers than that charged by other banks (para 2.20) has slowed down the pace and had adverse effects on operations by stopping many farmers from joining and many members from borrowing. GOB has recognized the need for reasonably uniform interest rates for similar loans granted by different institutions, and is considering necessary steps for narrowing the gap in short-term credit interest rates between TCCA/KSS cooperatives and other credit institutions. Restrictions to KSS and farmers' eligibility for borrowing, represent another constraint to operation of the cooperatives. Restrictions are caused by GOB credit ceilings, central planning of the seasonal lending program, limited range of farming activities which qualify for loans, and rules that prevent TCCA/KSS from employing their own resources for lending to members. Procedures for preparing seasonal lending programs are cumbersome and often cause late sanctioning of loans. As a result, members usually receive much smaller loans than they apply for, fre- quently late; consequently, many members have stopped borrowing. In view of the importance of TCCA/KSS cooperatives to the project, the major constraints to their rapid and sound development described above, require to be addressed as soon as possible. Proposals for measures for effecting change in loan eligibility criteria are discussed in para 6.13.

2.23 Traditional Cooperatives - date back to 1904. BSBL, the apex is the successor of the East Pakistan Provincial Agricultural Bank established in 1948. BSBL does not have branch offices and has not been able to supervise or guide constituent societies. Of the intermediate cooperatives, Land Mortgage Banks have offices only at district headquarters and their level of business has remained quite small; mainly for land purchases and some land improvement. DCCB have senior staff seconded from the Cooperatives Department and overall staffing is inadequate in most cases for supervising and guiding affiliated primary societies. Many of the latter are moribund due to heavy and chronic overdues. They would not participate in the project unless they can be reor- ganized in future and qualify as A or B class KSS, affiliated to TCCA.

2.24 Because of lack of resources of constituent societies, performance of BSBL reflects that of the whole traditional cooperative system. Total lending volume increased from Tk 100 M in 1975/76 to Tk 270 M in 1979/80, but loan recovery performance at 32% of demand at June 30, 1980 remains unsatisfactory. While recovery on current loans has averaged about 60% over the same period the size of overdues in relation to outstanding debts and owned capital causes concern. Overdues at June 30, 1980 amounted to Tk 298 M and included about Tk 147 M from loans granted between 1960/61 and 1974/75. Total overdues amount to 53% of outstanding loans and chronic overdues are far higher than owned capital of Tk 78 M consisting of paid in capital and reserves (Annex 1, Table - 11 -

7). Financial rehabilitation would be needed and reorganization and strengthening of staff before BSBL would be a suitable apex bank for a unified cooperative system or suitable for participating in the project. Proposals to this effect are outlined in para 6.12. Until BSBL is so qualified, Sonali Bank would continue to be the refinancing agency for TCCA/KSS for project and other lending transactions.

III. THE PROJECT AREA

General

3.01 The project would cover the Rajshahi Division in northwest Bangladesh, comprising Rajshahi, Dinajpur, Rangpur, Bogra and Pabna Districts (Map no. IBRD 15591), divided into 14 subdivisions and 111 thanas. The total area is 13,370 square miles with a population estimated at about 21.6 M, over 90% of which is rural. There are only eight towns with population over 50,000 which are administrative, educational, communication and trade centers and house most of the, as yet, relatively small industrial development of the Division. To allow effective development of necessary institutions, the project area would not be too large and would be confined to a reasonably compact area. The Rajshahi Division has been chosen because of its known groundwater resources, high crop production potential and relatively well developed agricultural services described below.

Climate, Topography, Soils

3.02 Rainfall is high and averages between 60 and 90 inches per year in various parts of the area. Over 90% usually occurs as monsoon rains between May and October and precipitation is inadequate in remaining months for high crop yields. Monsoon rains are preceded by "Norwester" showers during March- April which are important for sowing jute and broadcast rice crops. They tend to be erratic and for that reason yield of the early sown rainfed crops are poor. On average about twice in a decade rainfall is much below average causing considerable yield drop of rainfed crops.

3.03 November to February are the coolest months with mean minimum in the low to mid 50 F and mean maximums in the upper 70 F range.0 April to July are the hottest months with maximum temperatures in the mid 90 F range which drop to the upper 80 F range during the monsoons. Hot season and monsoon season temperatures are suitable for tropical crops while cooler winter weather allows production of wheat, potatoes and a variety of temperate zone vegetables.

3.04 The land slopes gently to the southeast with elevations touching 300 ft in the northwest going down to 25 ft above mean sea level in the southeast. Topography is almost flat and consists of wide shallow basins and ridges. Soils are all alluvial and vary from sandy ridge soils grading through loams and silts to heavy clays. Free draining sandy and loam soils are most common in Dinajpur and Rangpur Districts. The Barind tract, situated in Western Bogra and Rajshahi Districts, consists of heavy clay soils that set hard during the dry weather and., without irrigation, are difficult to cultivate at that time. In most other parts silt and clay soils predominate with more permeable loams confined to narrow ridges. There are no major soil fertility problems and crops respond well to standard fertilizer applications. - 12 -

Water Resources and Drainage

3.05 The project area is bounded in the south by River Ganges and in the east by the Brahmaputra (Jamuna). The Tista River crosses the northeast corner of the region and a number of small rivers cross the region in a north-south or south-east direction. In the rainy season, partly due to river flooding and partly to locally impeded drainage, much of the land is flooded but only about 15% deeply (more than three feet). In the dry season, however, surface irrigation potential is small and already largely utilized by traditional irrigation devices and about 4,500 low lift pumps operating in the area. There may be room for only another 1,000 such pumps. Total surface irrigation is estimated at about 650,000 acres and large-scale increase would only be possible if supplies are augmented by major river regulation or other construction works, some of which are under consideration.

3.06 By contrast, groundwater resources are rich and sufficient for irrigating the greater part of the cultivated area. Depth to water is within 10 to 20 ft below the land surface in much of the region even at the end of the dry season, making it suitable for STW development. However, in the western parts of Bogra and Rajshahi Districts, in the older alluvium, depth to water is greater or storage capacity of the shallow aquifer is relatively low and therefore the area is more suitable for DTW development (Map IBRD 15591). Water quality is excellent throughout the area.

3.07 By June 1979 a total of about 10,500 STW and 4,200 DTW had been installed in the project area. Estimates based on a computer model projected that about 60,000 additional STW and 15,000 DTW could be fielded. However, the assumptions used were very conservative and based on conjunctive use of DTW and STW, and an irrigated area of 15-20 acres per STW and 80 acres per DTW. The assumed areas per well are high. Substituting 10 acres per STW, which is more in line with present utilization and which gives satisfactory financial returns (para 7.06), would increase the potential to over 100,000 STW. The computer model is being updated and will be based on maximizing STW development, which should raise the potential numbers of STW that can be fielded considerably. Ongoing IDA and ADB projects and GOWB commitments provide for about 33,500 STW and 1,850 DTW for the project area, so that there is still a long way to go before the full potential for groundwater development can be attained.

Farm Size and Tenure

3.08 There are no regional data for farm size or farm size distribution since the 1960 agricultural census. At that time average farm size in the project area was 4.5 acres (compared to the 3.5 national average), ranging from 3.8 acres in Bogra to 5.5 acres in Dinajpur. About two thirds of the land was in holdings of more than 5 acres and was farmed by one third of the land holders. About half the farms were owner operated and most of the rest were operated by owners that rented in land, mostly on a sharecropping basis. Pure tenants comprised less than 10% of farm operators. As in the rest of the country, farms were severely fragmented, which makes farm management, particularly irrigation, difficult but provides some safeguards against total crop failure. - 13 -

3.09 The main change since that time is the increase in numbers of holdings, estimated by a national sample land occupancy survey in 1977 to be about 30%. Accordingly average farm size in the project area would now be about 3.5 acres. A sample of villages in Dinajpur indicates increase in holdings of less than one acre from about 15% to 30% of holdings and a decrease in holdings over five acres from 30X of total to 20%. A pilot agricultural census survey of a thana in Dinajpur showed the average farm consisting of six fragments with fragmentation ranging from 12 to about 4 depending on holding size. Tenure arrangements seem to have changed little over the last 20 years. Because of somewhat smaller than national average population density and slightly larger farms, provision of services to farmers would be easier and potentially credit worthy borrowers more plentiful than in many other parts of Bangladesh.

Land Use and Agricultural Production

3.10 Out of the total area of about 8.5 M ac about 6.8 M ac are cultivatable and net cropped area and current fallow account for about 6.6 M ac (Annex 2, Table 1). Multiple cropping is common and total or gross cropped area is about 9.6 M ac, giving a cropping intensity of 145% of net cropped area and current fallow or about 140% of cultivatable land.

3.11 Rice is by far the most important crop and is grown on about 7 M ac (73% of total cropped area), followed by jute on about 0.6 M ac (Annex 2, Table 2). Other important food crops are pulses and oilseeds and in recent years wheat production has spread rapidly and 0.65 M acs were reportedly grown during 1978/79 mostly on residual moisture during the cool weather. About half the sugar cane and tobacco area of Bangladesh is in the region which produces a little over half of Bangladesh's sugar and tobacco. In addition, a wide variety of vegetables is grown on the lighter soils.

3.12 There are three major land use systems determined by soil type and flood levels during the monsoons (Map IBRD 15590). In the deep flooded southern portion, deep water rice (broadcast aman) 1/ is the dominant crop, mixed with early season rice (aus) 1/ and followed during the dry weather by pulses and oilseeds grown on residual moisture. To date, there is no rotation proven on a large scale, that yields reasonable returns on investments for irrigation in these areas. For instance, introduction of an irrigated boro 1/ crop in the dry season (normally the most profitable option when irrigation becomes available) has not proved profitable because it replaces all other crops, since its harvest is too late to allow sowing of deep water rice. Higher boro yield does not compensate for higher production costs. Farmers and GOB research services are exploring alternative rotations to improve returns to dry weather irrigation in deeply flooded ares, which comprise 0.7 M ac or about 11% of the cultivated land in Rajshahi Division. Large- scale minor irrigation development in these areas may therefore be possible in future, but is unlikely during the project period, unless flooding in any locality is controlled by drainage works, which would convert the land use system into one of the shallow flooded categories, which are described below.

1/ The various rice crops grown in Bangladesh--b. aus, t. aus, b. aman, t. aman and boro are explained in the glossary. - 14 -

3.13. On the heavy Barind clays on which flooding is shallow, only one main season rice crop--transplanted aman (t. aman) 1/ is commonly grown under rainfed conditions and irrigation would add a second paddy crop--boro--during the dry weather. In the rest of the project area flooding is shallow or absent, soils are lighter and a large variety of crops are grown, including most of the jute, wheat, tobacco and vegetables of the region. Rice crops are more adversely affected by drought conditions and irrigation would help improve main season crops in drought years. The main effect of irrigation would be cropping intensification during the dry season by increasing wheat area and yield, encouraging cash crop production, allowing boro cultivation and conversion of low yielding broadcast aus to HYV transplanted aus (t. aus). 1/

3.14. Rice production in the five districts has fluctuated over the last five years between 3.2 and 3.5 M tons per annum increasing very gradually. By contrast, wheat production has grown eightfold over the same period, from 50,000 to over 400,000 tons. Main increases in rice production had been expected from increased fertilizer use in all seasons, spread of HYV t. aman and the impact of irrigation, particularly on aus and boro production. Spread of irrigation works is too recent for impact except over the last two years, 1979/80 and 1980/81. In 1979/80 effect of improvements was masked by extreme drought but production would have been substantially lower without irrigation developments of the preceding two or three years. The current harvest, which is forecast to be an alltime record high, was helped by favorable weather, but may be a sign of the impact of improved technology.

Transport Infrastructure

3.15. The region is furthest from ports and access is difficult due to the two major rivers--Ganges and Brahmaputra that divide it from other parts of the country. A 500 mile paved highway and a 600 mile railways system link main towns. These systems are adequate for agricultural inputs supply and crops transport, provided enough lead time is given for movement of goods. Internal communications are poor and villages are connected by dirt roads passable only on foot or by bullock carts during the main rain. Bullock carts therefore remain the main mode of transport for inputs or produce. While improved communications would be desirable, existing infrastructure would be adequate for the proposed project.

Inputs

3.16 BADC is responsible for import or local procurement of fertilizers and for distribution and storage down to thana level. Its storage system is being strengthened by assistance from USAID. IDA has also supported improvement of fertilizer supplies through four credits, two for fertilizer manufacturing 2/ and two for fertilizer imports. 3/ Retailing is done by private

1/ The various rice crops grown in Bangladesh--b. aus, t. aus, b. aman, t. aman and boro are explained in the glossary.

2/ Credits 527-BD and 1023-BD.

3/ Credits 944-BD and 1044-BD. - 15 - dealers. Arrangements are satisfactory and fertilizer use has almost trebled over the five-year period 1974/75 to 1978/79 from about 70,000 tons to almost 200,000 tons and continues to expand. Pesticides, formerly imported and distributed by the Department of Agriculture, are now handled by the private sector. Distributor change coincided with removal of the subsidy and resultant steep price rise has temporarily reduced demand. A satisfactory dealers network has been established and improved packaging has also started. Produc- tion, import and distribution of most seeds is BADC responsibility and has not been altogether satisfactory to date. Improvements are supported by an ongoing IDA supported Credit 410-BD and are to receive further support from a follow- up project being processed at present. Supply of paddy seed has not proved a problem, but wheat and potato seed have been scarce at times and the proposed seed project would address these problems. Overall supply and distribution arrangements for major inputs are adequate for the project.

Electricity Network and Diesel Supply

3.17 The rural electricity network has not been sufficiently developed in the project area to provide power for a significant number of irrigation pumps. Considerable rural electrification work is in progress, notably the USAID supported rural electrification scheme, and IDA is also planning a project to support rural electrification. As a result, during the later stages of the project, installation of electrical pumps may become possible in small parts of the project area. However, the main source of power for pumps during the project period would continue to be diesel engines. Importing, bulk distribution and storage arrangements of diesel and lubricating oil by the Bangladesh Petroleum Corporation and three nationalized oil marketing companies are adequate for the project. BADC and oil marketing companies agents and subagents retail diesel in the project area. BADC initially sold fuel only to farmers using BADC or BADC installed pumps, but latterly has agreed to sell to other farmers as well. With about 1.5 million gallons bulk storage at 48 thana or district centers, stocks of drums at most other thana headquarters and with plans for considerable expansion of bulk storage, BADC aims to cater for at least 50% of rural diesel fuel demand. Oil company agents are in major urban centers, but there are subagents, selling kerosene in every village, who receive supplies in drums by bullock cart. They already handle diesel fuel during the irrigation season and are expected to do so increasingly as demand expands. The supply network is therefore adequate and farmers have rarely experienced diesel shortages in the past. However, they have complained about poor quality of fuel at times, particularly that purchased from oil company agents and subagents and fuel quality would need to be monitored during the project.

Agricultural Credit

3.18 There are 756 CB branches (546 rural), 93 BKB branches and almost 11,000 KSS affiliated to 76 TCCA in the project area (Map IBRD 15591). Of these about 550 CB branches which belong to Sonali; Janata and Agrani Banks; all BKB branches and about 4,000 A and B class KSS would be available for project lending and comprise a very adequate credit outlet network. With the exception of BKB, which has financed over 5,000 STW in the area, other credit institutions have so far dealt predominantly with short-term credit. In - 16 -

1979/80 for instance all but about 2% of about Tk 210 million disbursed by CB and KSS in the region was for short-term crop production credit. However, loans for about 1,500 STW had been processed during the year by KSS as part of implementation of two IDA supported projects, Rural Development Project I (Credit 631-BD) and Shallow Tubewells Project (Credit 724-BD). The capacity of credit institutions to process STW loan applications needs to be expanded, but the considerable experience with short-term credit will facilitate provision of adequate crop production credit to support investments in irrigation equipment.

Agricultural Extension and Research

3.19 Agricultural research is coordinated by the Bangladesh Agricultural Research Council and conducted by a number of GOB or semiautonomous institutes including the Bangladesh Rice Research Institute, Jute Research Institute and Bangladesh Agricultural Research Institute. The latter works on most crops not dealt with by specialist Institutes and has substations in the project area. Rice research supported by the International Rice Research Institute has been most successful to date and the IDA supported Agricultural Research Project (Credit 828-BD) is helping to strengthen staff, equipment and other facilities of the Bangladesh Agricultural Research Institute.

3.20 Two IDA supported projects--Extension and Research Project (Credit 729-BD) and the Jute Project (Credit 765-BD)--are helping GOB to improve extension and field research in the project area. Both projects are using "Training and Visit" extension concepts. Impact of the Jute project has been quite promising to date and the general extension services have also made some progress, but their advice has so far reached the field level only in some parts of the project area. Efforts are continuing to improve performance elsewhere as well. The two projects will help ensure that the Rajshahi Division will have well staffed and well-equipped extension services.

Marketing, Storage, and Processing

3.21 Marketing, storage and processing facilities for main cash crops-- jute, sugarcane and tobacco are reasonably satisfactory and the Jute Project (para 3.20) is exploring ways of further improving Jute storage and marketing arrangements. While the bulk of rice is used for subsistence an average of about 200,000 tons foodgrain per year (mainly rice) is procured by the GOB Food Ministry in the Rajshahi Division. For that purpose and for storage to meet foodgrain deficits in part of the area, the GOB Ministry of Food maintains about 245,000 tons foodgrain storage capacity in the project area. The IDA assisted Second Foodgrain Storage Project (Credit 787-BD) is adding 90,000 tons storage there and a third storage project, to be prepared in 1981 would explore additional storage requirements. Grain procurement arrangements do not work smoothly in all areas, particularly during good crop years and greater participation by the private grain trade in procurement would help to stabilize prices. In fact, GOB expects that the greater the demand for grains from private traders, the less harvest time prices would have to fall to equate marketed supply and effective demand. Inadequate storage has been identified as a major constraint to private sector participation in grain trading and GOB has recently instructed CB to provide credit to grain traders for storage construction. The project would support the GOB program (para 4.11). - 17 -

IV. THE PROJECT

Project Genesis

4.01 The Government of Bangladesh has for some time been exploring the possibility of Bank Group support for agricultural development through credit. In the early post independence years the Bangladesh agricultural credit sector was weak and in 1977, assisted by the First IDA Technical Assistance Project (Credit 409-BD) GOB employed consultants (Messrs. Robert Nathan and Associates, Inc.) to review the agricultural credit system, suggest improvements and identify investment opportunities through agricultural credit. The consultants published their final report in August 1979. Based on their report, the FAO/World Bank Cooperative Program identified a project in January 1980 and followed up in May 1980 to prepare the project. The project is based on the August 1980 Report of the FAO/World Bank Cooperative Program and on the findings of an October/November 1980 appraisal mission.

Project Summary

4.02 This would be the first IDA assisted agricultural credit project in Bangladesh. Its main objectives would be (a) to establish a replicable system for delivery of long-term agricultural credit, and (b) to increase agricultural prcduction,rural incomes and employment opportunities. The project period would be four years and the project would cover the five districts of the Rajshahi Division of northwest Bangladesh. As indicated in para 3.01, the compact project area would allow concentration of efforts to develop a long- term lending system that could then be spread to other parts of Bangladesh. The Bangladesh Bank and participating credit institutions (particularly CB that have done virtually no term lending to date) would concentrate efforts in a confined geographical area or on a relatively small part of their branch network, to build up long-term lending capacity. Similarly, the compact project area would allow more effective organization, initially, of equipment supplies, workshops and drilling contractors, compared to dilution of such efforts over a wider area. However, extension of the project to other areas of high development potential could be considered jointly by GOB and IDA, later during the course of the project. Main emphasis of the project would be on provision of credit to farmers or farmers' groups for installation of STW. There would also be a pilot component to help develop diversified lending including grain storage. In addition, to improve tubewells repair and maintenance, there would be credit for equipping workshops and village mechanics. Finally, to strengthen participating credit institutions, there would be funds for technical assistance and for local and overseas training. The following is a list of project components:

(a) Credit

(i) to farmers' groups and farmers for constructing and equipping STW;

(ii) to workshop owners for equipping tubewells maintenance and repairs workshops; - 18 -

(iii) to village mechanics for purchasing toolkits and bicycles;

(iv) for construction of grain storage; and

(v) for pioneering new lines of credit for such investments as water distribution channels and for various items of farm equipment.

(b) Funds for Participating Credit Institutions

(i) for a technical assistance program of about 56 man- months consultants time; and

(ii) for local training programs and about 70 man-months training abroad.

While it is difficult to forecast the exact quantity of each component that beneficiaries would borrow for, financing of 27,000 STW; 50 sets of workshop equipment and 500 toolkits for village mechanics has been assumed for the purpose of estimating project cost.

Detailed Features

4.03 General. The project, by supporting long-term credit to agriculture, would be a continuation and acceleration of IDA assistance for developing the minor irrigation potential of Bangladesh (paras 1.09-1.13). It would fit in well with the Manually Operated Tubewells Project, which has also been recently appraised and which has been specifically designed to benefit very small farmers who own less than 1 acre of land and who might not have opportunity to participate in an STW program in the project area. There is great scope for rapid increase in agricultural production by providing credit to farmers for installing irrigation facilities. The project area is particularly suitable for this type of development, with its high production potential; well- developed banking network; proven groundwater resources; improvement, partly through IDA support, of supporting services such as extension and research; and existence of farmers' demand and construction and maintenance facilities for tubewells created by earlier development schemes. However, there are two preconditions of success for developing minor irrigation through agricultural credit. The first is to adapt the credit delivery system to long-term lending and steps to develop such system are described in paras 6.01 through 6.09. The second is an adequate supply of equipment in rural areas available to borrowers and cash customers on demand. Measures to gear up such supply are discussed below.

4.04 Equipment Supplies. In the past, supplies of irrigation equipment have been unsatisfactory. Centralized procurement through BADC or BKB has not placed enough equipment into rural areas or provided it at the right time. As a result, there is no equipment for sale in shops in the project area. GOB and IDA agree that the solution to the equipment supplies problem would be to let the private sector import or manufacture equipment and distribute it. The first step towards such an arrangement was taken with the Shallow Tubewells Project (Credit 724-BD). Procurement based on "farmers' choice", from a number - 19 - of makes tested and found to be satisfactory in Bangladesh was introduced and helped to speed up the project, which earlier was seriously delayed due to problems in procurement by BADC. Further measures towards private sector supplying minor irrigation equipment were taken in the Low Lift Pump Project (Credit 990-BD), which includes procurement of pumpsets (essentially the same type as those used for STW) in two stages. The first batch of 1,500 are to be procured by BADC, based on the farmers' choice system, but the second batch of 4,000 sets are to be imported by selected private sector dealers of engine makes identified by the farmers' choice system, for direct sale to farmers participating in the project. Involvement of the private sector in supply of irrigation equipment was further emphasized by the Ninth Imports Program Credit (Credit 1071-BD), which includes funds for import and direct sale to any farmers of STW equipment, by dealers of makes previously qualified under Credits 724-BD and 990-BD. Based on measures evolved in the above three projects, STW equipment for the project described in this report would be supplied by the private sector and stocked in the project area, so that farmers would be able to purchase equipment of their own choice.

4.05 Up to now, the private sector has mainly supplied equipment on the basis of orders and, has not had to risk investments in sizeable equipment stocks to be sold in the open market. All firms concerned assured the appraisal mission that they would welcome open market competition to develop the potentially lucrative STW equipment trade in Bangladesh. However, participating firms would need encouragement, particularly in the early stages, to build up adequate equipment supplies. Three prerequisites for encouraging adequate imports by private firms would be: adequate open import licenses for STW equipment and spares; foreign exchange; credit for holding stocks; and a satisfactory profit margin. GOB undertook to provide these facilities and conditions to participating firms under the Ninth Import Credit and would continue to do so for this credit.

4.06 Importing firms would apply to the Chief Controller of Imports and Exports for necessary imports licenses and inform BB of foreign exchange and credit requirements. BB would immediately recommend all qualified applications and arrange adequate foreign exchange and credit through the applicants' CB. To reduce interest cost to importers, standard margin requirement at the time of opening letters of credit for STW imports would be maintained at 20% compared to 25% for most other purposes, as agreed by BB for the Ninth Import Credit. In addition, since BADC is likely to remain a major STW equipment sales agency for some time, the safeguards against subsidized sales by BADC that could undercut private sector competitiveness, and which were agreed for the Ninth Import Credit, would also be maintained for this project. The safeguards required BADC to include import duty (currently 15% of c.i.f. value) plus a 14% margin based on c.i.f. or local ex-factory equipment cost, to cover handling costs and profit margin. The latter two measures should ensure a reasonable profit margin for private suppliers of STW equipment. To replenish equipment from time to time as needed, import licenses would be renewed, based on recorded sales in the project area. To ensure satisfactory services to farmers, assurances were obtained that open import licenses would only be provided to firms with an adequate distribution network in the project area with spares, repairs and STW construction facilities satisfactory to the Bangladesh Bank. - 20 -

4.07 There are already eight engine brands identified by farmers' choice procedures under Credits 724-BD and 990-BD or established under other schemes, mainly BKB lending, which have been tested and have proved to be satisfactory for Bangladesh conditions. The equipment ranges from more costly modern, to cheaper equipment for which design may be outdated in developed countries, but which has proved its value in developing countries. Competition between representatives of different makes for attracting "farmers' choice" orders through the public sector has been intense and is expected to continue when firms will have to sell equipment stocked at their own risk. In addition, most of the makers of engine brands in common use, have made arrangements for local manufacture or are discussing plans with GOB for doing so. Because of limited market size, introduction of additional brands would discourage existing agencies from making the necessary investments needed for an adequate equipment supply for the project and would make provision of spares and maintenance facilities difficult. The appraisal mission therefore agrees with GOB that only engine brands established by farmers' choice procedure or otherwise already widely distributed should qualify for project supplies, and the list of such brands was agreed at negotiations (Schedule B). So far, two firms who are represented on the agreed list have started small-scale production of diesel engines in Bangladesh. It would be important to maintain a reasonable choice of equipment for farmers and adequate competition between qualified firms. Therefore, if any manufacturer or dealer withdraws from the agreed list, or proves unsatisfactory, GOB would encourage a new dealer/manufacturer to enter the market, provided the concerned firm has suitable equipment and can establish satisfactory repairs, spares and distribution facilities in the project area.

4.08 The representatives of the selected engine suppliers would couple the engines to pumps, which they would purchase locally or import. There are 12 manufacturers of pumps in Bangladesh and their prices are generally competitive despite very high tariffs on the raw materials needed for pump manufacture. The items - scrap metal, steel, coke and synthetic sand - make up 55%-75% of pump manufacturing costs and bear import tariffs of between 60% and 120%. GOB is discussing with IDA ways and means of stimulating its engineering industry. A reduction in currently burdensome tariffs on raw materials is likely to be one method selected and this should increase the competitiveness of domestically made pumps. The engine represents about 73% of a pumpset cost and the pump and coupling materials about 27%.

4.09 Shallow Tubewells. Long-term loans would be provided to groups of farmers or farmers for purchase and installation of about 27,000 STW. A typical STW would consist of approximately 90-110 ft of 4 inch diameter piping including blank piping in the upper portion with about 40 ft well filter at the bottom and a pumpset on a metal frame consisting of a centrifugal pump coupled to a 5-6 hp diesel engine. Well discharge would range from 0.5-0.75 cusecs. Drilling would be by local contractors, who are available in adequate numbers, using inexpensive locally made equipment. The Technical Cell of BB's Project Department (para 6.03) would, in consultation with groundwater engineers of the Bangladesh Water Development Board, BADC and BKB provide guidelines for STW designs, particularly with regard to drilling depth and length of strainer to suit different geohydrological conditions in the project area. Normally the pump and engine would be placed at ground level, but in some - 21 - cases water levels may fall lower than 20 ft below ground level and at such depths centrifugal pumps beccome ineffective. In such cases the pump and engine can be placed in a shallow pit, but when the pit needs to be deeper than three ft, either the engine should be fitted with an elongated exhaust pipe Lo avoid danger from fumes or should be placed at ground level and connected to the pump by belt and pulley. Need for pits deeper than three ft is expected to be small. Since individual fields are small and pumpsets portable, one pumpset could service a number of well points that would represent only one third of the cost of an SB;. By this means small farmers unable to afford an STW could participate, as could landless people who would be able to borrow for purchase of a pumpset to service well points, or pump water from pools or streams. GOB has already initiated this type of lending on a small scale and the project would provide opportunity for greater participation of landless people in profitable utilization of the country's water resources.

4.10 Workshops, Equipment and Tools for Mechanics. Most STW repairs take place on farm, but for major repairs engines are taken to workshops. At present BADC provides workshop and field mechanic services for its owned or installed equipment. In addition there are several private workshops in each major urban center and a growing number of village mechanics. BADC is interested in scaling down its workshop activities on the one hand and on the other the number of irrigation pumps, particularly STW is increasing rapidly so that privately operated repair and maintenance facilities will have to expand. The project would finance basic equipment such as lathes, drills, grinders and supporting tools for 50 workshops. Funds for buildings are not needed since workshops operators prefer rented premises. In addition funds would be lent to 500 village mechanics to purchase tools necessary for STW maintenance and repairs; and a bicycle each. These investments would augment funds for equipping workshops provided by Credit 724 and by the recently approved ADB Second Credit Project. There is an adequate source of trained mechanics from politechnics, an ILO funded mechanic training scheme and from on-the-job training in BADC and existing workshops to take advantage of this part of the credit.

4.11 Grain Storage. To support the GOB program to expand the role of the private sector in foodgrain marketing (para 3.21), the project would provide credit to private investors for constructing grain storage. Demand for credit for storage has not been determined and participating banks have little experience to date with this type of lending so that total construction under this component may only be modest and may not exceed capacity for 10,000 tons foodgrain storage. Stores would be from 100 to 500 tons capacity. Design would generally comprise raised concrete floors, brick walls and either corrugated iron or reinforced concrete roofs, but use of new designs, at present under development would not be excluded. To ensure satisfactory design, only borrowers using plans satisfactory to BB would qualify for project loans.

4.12 Other Diversified Lending - would include funds for lending for miscellaneous farm implements, irrigation water distribution systems and other as yet not identified lending purposes. Any schemes for lending under this part of the project would require BB approval. - 22 -

4.13 Training. Basic training in commercial or cooperative banking is provided by each CB and by cooperative training institutes, but only BKB has undertaken agricultural credit training programs. The main gap is lack of training in appraisal, supervision and loan recovery of long-term credit. This would be provided by the project partly through short-term training abroad, but mainly through local training of the approximately 1,000 banking staff who would be needed for the project. GOB and participating institutions agreed to a program of 50 short-term training fellowships abroad each of about 4-6 weeks duration, a total of 70 man-months. Estimated cost would be about US$4,300 per training month including air travel, local travel, subsistence, tuition and other minor expenses. Assurances were obtained that the program for training abroad, satisfactory to the Association would commence before November 30, 1981.

4.14 The much larger local training program had not been finalized by GOB at appraisal and an outline plan for such training was agreed at negotiations. The outline plan, on which cost estimates for this component have been prepared, provides for CB to train junior field staff in their own training institutes, BKB to train its own and cooperative staff in its recently opened training center in Bogra and for senior staff training to be initiated at the Bangladesh Institute of Bank Management which is already conducting some banking training. Training would take place in rented premises and the project would provide equipment, vehicles, furniture and recurrent expenses over the project period. Assurances were obtained that a detailed plan, satisfactory to IDA, would be prepared promptly and that execution of the agreed training plan would commence by November 30, 1981.

4.15 Consultants. The project would finance 56 man-months of consultants time. Of this, the following would be required for the Bangladesh Bank; 16 man-months for two consultants--a credit specialist (10 man-months) and an agricultural economist (6 man-months)--to assist development of the Project Department of the Bangladesh Bank; 10 man-months for a training specialist, who would design and initiate the project training program; and 12 man-months for a cooperative agricultural credit specialist to help plan and implement a program to improve TCCA/KSS operations (para 6.13). The balance of 18 man- months would be needed for two consultants (a management expert for 10 man- months and a cooperative credit expert for 8 man-months) to help strengthen and develop BSBL. Cost of consultancies has been estimated at US$10,000 per man-month, which would include air fares, living expenses and local travel. All consultants should be recruited as soon as possible, but there is special urgency for appointment of the credit specialist for Bangladesh Bank and the training specialist. Assurances were therefore obtained that the credit specialist for the Bangladesh Bank and the training specialist would be appointed on terms and conditions satisfactory to IDA by November 30, 1981, the cooperative agricultural credit specialist by December 31, 1981 and the others by March 31, 1982.

Environmental Aspects

4.16 The project would have no adverse environmental aspects. Tubewells investments would do no harm to groundwater resources, but might cause a small increase in malaria incidence, due to rice cultivation in the dry season. - 23 -

However, any minor ill effects would be far outweighed by improvement in health of project area inhabitants by provision of more widely spread drinking water sources and, through increased agricultural production, improved nutri- tion. In addition, GOB is already stepping up malaria control work in the face of increased incidence in most parts of the subcontinent, in recent years.

Project Phasing

4.17 During the first year, lending activities may be quite modest while steps are taken to organize the BB Project Implementation Unit (para 6.02), training and staffing for participating credit institutions and the equipment supply pipeline. Nevertheless, GOB has been urged to take early action to encourage import and distribution of equipment for the first year, for which orders should be placed by March 1981. In the second project year, all project lending is expected to gain momentum, and reach a peak in the third year. Notional achievement forecasts for project lending operations, used for cost estimates, are shown on Table 1 of Annex 3. Expenditure on consultants and short-term training abroad is projected to take place during the first two years, while local training would continue during the whole project period.

V. COST ESTIMATES, FINANCING, PROCUREMENT AND DISBURSEMENTS

Cost Estimate

5.01 Total costs are estimated at US$62.4 million equivalent of which US$34.1 million or 55% would be foreign exchange costs and US$8.8 million would be duties and taxes. Estimates are based on October 1980 prices. Price contingencies for foreign exchange cost of 9% for 1981, 8.5% for 1982 and 7.5% for 1983 onwards and of 7% compounded annually for local cost have been applied to base cost. Total contingencies amount to US$14.1 million or 23% of total cost. Detailed costs are given in Annex 3 and are summarized below. - 24 -

Summary Cost Estimates

% of Tk million US$ million Total Category Local Foreign Total Local Foreign Total Cost

Credit

Shallow Tubewells 301.3 368.3 669.6 18.8 23.0 41.8 67 Tools and Equipment for Workshops 5.9 17.8 23.7 0.4 1.1 1.5 2 Tools and Equipment for Village Mechanics 2.2 3.3 5.5 0.1 0.2 0.3 - Grain Storage 14.3 2.5 16.8 0.9 0.2 1.1 2 Other Diversified Lending 17.6 14.4 32.0 1.1 0.9 2.0 3

Subtotal 341.3 406.3 747.6 21.3 25.4 46.7 74

Technical Assistance and Training

Consultancies - 9.0 9.0 - 0.6 0.6 1 Fellowships - 4.8 4.8 - 0.3 0.3 ) 2 Local Training 9.0 2.2 11.2 0.6 0.1 0.7 ) 2

Subtotal 9.0 16.0 25.0 0.6 1.0 1.6 3

Base Cost 350.3 422.3 772.6 21.9 26.4 48.3 77

Price Contingencies 101.8 124.4 226.2 6.4 7.7 14.1 23

Total Project Cost 452.1 546.7 998.8 28.3 34.1 62.4 100

Incremental staff and other incremental expenses of project agencies were not included in the estimates because they are fully recovered by interest on loans paid by beneficiaries of the credit category.

Financing

5.02 The proposed IDA credit of US$40 million would be made to GOB on standard terms and would cover about 75% of project cost net of duties and taxes, 64% of total project cost or all foreign exchange and 21% of local costs. The balance would be met by farmers, other investors, GOB, Bangladesh Bank and participating banks as shown in the following financing plan: - 25 -

Proposed Financing Plan

Other Borrowers GOB BB Banks IDA Total US$M % US$M % US$M % US$M % US$M % US$M %

Shallow Tubewell 3.2 6 - - 11.4 21 5.4 10 34.2 63 54.2 87 other Lending 0.4 6 - - 1.3 21 0.6 10 3.9 63 6.2 10 Training and Consultant - - 0.1 5 - - - - 1.9 95 2.0 3

Total 3.6 6 0.1 - 12.7 20 6.0 10 40.0 64 62.4 100

5.03 GOB would make US$1.9 million of the IDA credit available to the Bangladesh Bank and through it to other participating Banks to pay for training and consultants expenses, on standard terms for such assistance to its agencies. GOB would also execute a Subsidiary Agreement with Bangladesh Bank under which it would onlend the balance of the credit, US$38.1 million, to the Bangladesh Bank, repayable in periods depending on the repayment period of Bangladesh Bank refinance to participating credit institutions, but not exceeding 15 years, at an annual interest rate of 5% to banks lending directly to ultimate borrowers and 3% to Sonali Bank for onlending to TCCA/KSS. GOB would bear the foreign exchange risk. It would be a condition of credit effectiveness that the Subsidiary Agreement satisfactory to IDA had been executed.

Procurement

5.04 Procurement involving relatively small investments by farmers and other borrowers would be based on farmers' choice through local dealers and contractors. Typical items would be STW pumpsets, piping, screens and construction, workshop equipment, tools, bicycles (for village mechanics), and miscellaneous farm implements such as sprayers, carts and threshers. STW equipment would be the main item and measures for building up an adequate supply and choice for farmers has been described in paras 4.04 through 4.07. Construction of storage godowns would be based on contracts let under local procedures, approved by the Bangladesh Bank. The procedures are satisfactory to IDA. Furniture, equipment and vehicles for training establishments costing in total US$0.2 M equivalent would be procured over three years by local competitive bidding and remaining local training costs amounting to US$0.5 M equivalent would be for staff pay, operating costs and trainee stipends and would not be subject to tender procedures. Small off-the-shelf items, costing less than US$10,000 and not more than US$0.1 M in aggregate, which are urgently required for the project training component would be purchased by prudent shopping, through normal commercial channels. - 26 -

Disbursements

5.05 IDA disbursements of the credit would be against:

(a) 75% of amounts disbursed by Bangladesh Bank to refinance loans made by participating credit institutions;

(b) 100% of consultants and training fellowships costs; and

Disbursements for cost of consultancies and training fellowships would be made against full documentation, to be supplied by GOB to IDA. Other disbursements would be made against: (a) Bangladesh Bank's certified statements of loans made by participating credit institutions and refinanced by Bangladesh Bank; and (b) Bangladesh Bank's certified statements of expenditures for expenses incurred for local training. Documents in support of the certified statements of expenditures would not be submitted to IDA, but would be retained by the Bangladesh Bank and made available for inspection to the accredited representatives of IDA's supervision missions. Bangladesh Bank would verify each application for refinance by participating banks to ensure that it conforms with agreed lending terms and conditions. Each loan would be physically verified by the lending bank, which would issue a completion certificate for each completed loan, and Bangladesh Bank would carry out sample checks. Certifi- cates of expenditure would be audited by independent auditors as part of the annual audit of Bangladesh Bank (para 6.26). A schedule of estimated quarterly disbursements is shown in Annex 4.

VI. PROJECT ORGANIZATION AND IMPLEMENTATION

Bangladesh Bank Project Department

6.01 The Bangladesh Bank through its Project Department would be the main executing agency. It would be responsible for planning and supervising all aspects of project implementation including adequacy of equipment supplies, and construction agencies; execution of the technical assistance and training programs; and the refinancing of participating credit agencies for approved project lending to final borrowers. The agencies would be BKB, the three main commercial banks--Sonali, Agrani and Janata Banks--and the TCCA/KSS cooperative system. Later during the project BSBL may also participate as apex institute for the cooperatives (para 6.10). BADC would be an important supporting agency which would provide technical support to cooperatives (para 6.19). Project organization, credit flow and coordination is illustrated on Chart 22503.

6.02 The Project Department, through its role in implementing this project should become an important development agency, capable of planning and implementing agricultural credit schemes and helping Bangladesh credit agencies to acquire similar capabilities. For these purposes the Department would be strengthened, and organized into four Wings--the Planning Wing, the Operations - 27 -

Wing, the Monitoring and Evaluation Wing and the Special Schemes Wing. The first three of the above Wings would constitute the Project Implementation Unit, which would manage all aspects of the project, and would be headed by the Project Director. He would report directly to the Department Head--the Officer on Special Duty (para 2.06). To avoid disrupting ongoing operations of the Department, present and planned lending schemes other than the project would be managed by the Special Schemes Wing. It would operate independently under the Project Director and may, in time, merge with the Project Implemen- tation Unit. The above organizational arrangements (Chart 22504) were discussed and agreed at negotiations.

6.03 The Operations Wing would include a Supervision Cell, a Supplies Cell and a Finance and Accounts Cell and would also control subunits for intensifying field supervision, to be set up later, one in each of the two BB regional offices in the project area. The Planning Wing would have three Cells--Policy, Technical and Training. Functions of the Wings and Cells comprising the Project Implementation Unit are described in Annex 5.

6.04 Early recruitment or deputation of key staff would be important, in particular, appointment of the Project Director who should be at least of Chief Officer rank; a senior supplies officer and a training officer. The Project Director's appointment, satisfactory to the Association has been confirmed and that of the other two key personnel, would be a condition of effectiveness. Each wing would be headed by an officer of at least Deputy Chief Officer rank and appointment of this staff, together with nine suitably qualified officers as preliminary staffing for various cells and subunits should also take place soon, and would also be a condition of project effectiveness. Appointment of the supplies officer would be particularly important to undertake the difficult task of initiating the project equipment pipeline. Appointment of the training officer would be equally important to establish the project training program.

6.05 As already indicated (para 4.15) the Department would be supported by three internationally recruited consultants. The first would be a credit specialist, who over a 10-month period would help to establish the Unit, draw up an operations manual and design reporting, loan appraisal and loan recovery systems. He would be needed as soon as possible. However, preliminary lending operations guidelines to ensure early start of lending operations, would be provided by the Department even prior to arrival of the consultant. The second would be a credit training specialist to help to plan and organize the project training program, he would also be needed as soon as possible; and the third consultant would be an economist to establish scheme evaluation systems and would be needed by March 1982 to initiate studies that would start in the fall of that year.

Lending Operations

6.06 Under a subsidiary loan agreement with the Bangladesh Bank (para 5.03) GOB would onlend the main part of the credit to the Bangladesh Bank for refinancing BKB, the three commercial banks and through Sonali Bank the TCCA/KSS cooperatives which would provide loans to farmers and other borrowers. Participation of these institutions in project lending would - 28 - be subject to completion of a participation agreement satisfactory to the Association, between BB and the institutions. Sonali Bank as their refinancing agency would cover lending by TCCA/KSS cooperatives in its participation agreement with BB. The agreement would embody lending terms and conditions relevant to any one of the institutions. Assurances were obtained that participation agreements satisfactory to the Association would be completed by participating credit institutions. Bangladesh Bank would prepare a banking plan that would include inter alia the Bangladesh Bank role in project implementation; proposals for banking coverage of the project area and allocation of specific areas and types of loans to each institution; lending targets and phasing; staffing and training arrangements and norms; loan processing criteria and procedures; procurement and construction procedures; supervision, monitoring and reporting requirements; coordination arrangements; and services to be provided by other agencies. Completion of the banking plan satisfactory to IDA would be a condition of effectiveness.

6.07 The following table shows proposed areas and lending purposes of participating credit institutions:

Credit Institution Area Lending Purposes

BKB All areas except STW thanas served by the ADB Second Agricultural Credit project

All areas All other purposes

Commercial Banks All areas All purposes for direct lending to borrowers

TCCA and "A" and All areas covered by STW "B" Class KSS "A" and "B" Class KSS refinanced by Sonali Bank

To avoid confusion, particularly in applying for project refinance from ADB and IDA, BKB would not lend for STW in thanas included in the Second Agricul- tural Credit Project recently agreed between GOB and BKB with ADB, which also finances STW.

6.08 Organization and basic staffing patterns of participating institutions are generally satisfactory but staffing would need strengthening for successful project implementation. BKB would appoint a senior officer in the Special Projects Department at headquarters to oversee the project. In the field, where the organization has not already been strengthened for the ADB project, BKB would designate a senior officer at each regional office (one in each district) to be responsible for project implementation and appoint a groundwater irrigation engineer at that level and junior engineers and loan officers (investigation officers and supervisors) according to banking plan norms (para 6.06). Participating CB would also appoint a senior official in - 29 -

each of their headquarters agricultural credit departments and at each regional (district) office tc be responsible for the project. They would also employ one senior groundwater irrigation engineer at headquarters and at least one groundwater engineer initially at each regional office. For appraisal and supervision one trained farm technologist or senior agricultural clerk could be used for a group of branches initially. Both engineers and loan officers would be increased when lending expands, according to banking plan norms. Participating TCCA would each designate two of its most experienced inspectors and the Deputy Project Officer for project loan appraisal and follow up and arrange for appropriate training. As with other credit agencies, the number would be increased as specified by the banking plan, to cater for increased lending as well as short-term lending of each TCCA. While BKB and CB would be responsible for technical aspects of appraisal and verification, TCCA would rely on BADC for those services. TCCA would, however, in common with BKB and CB help borrowers to contact dealers for choosing equipment and contractors for STW construction.

6.09 Improvement of loan recovery would be necessary for most institutions, As a first step, GOB and BB would obtain accurate information on loan recovery status of agricultural loans of each institution, and assurances were obtained that the information would be collected by December 31, 1981. Data for short-term and term loan recoveries should be presented separately and guidelines for drawing up a loan recovery reporting system are shown in Annex 6. Where recovery of any outlet in the project area is less than 60% of demand, the institution would develop a program satisfactory to BB and IDA to improve recovery. Such program would include employment of adequate trained staff for appraisal, supervision and loan collection efforts; secondment by GOB of special loan recovery officers, particularly to CB to accelerate loan recovery through GOB revenue collection; adoption of special loan recovery programs; and measures for dealing with debts that are more than five years old. However, no credit outlet in the project area would be eligible for participation in project lending if loan recovery drops below 40% of demand, and, after December 31, 1983, below 50% of demand, for as long as loan recovery remains below those respective levels and assurances to this effect were obtained. In addition, assurances were obtained that during the course of the project GOB would develop performance criteria to be agreed by IDA before December 31, 1983 that would determine eligibility of any credit institute to receive GOB or BB refinance for agricultural lending.

Proposals for Restructuring Cooperative Banking

6.10 GOB is planning to reorganize agricultural cooperatives. While there had been no detailed planning as yet, broad proposals under discussions by GOB at appraisal included unification of the two cooperative systems by affiliating traditional primary cooperatives with TCCA; retaining DCCB, but in a greatly reduced role; establishing thana banks as TCCA banking outlets; and replacing Sonali Bank as a refinancing institution for TCCA/KSS cooperatives by BSBL, as apex and sole refinancing institution for the unified cooperative credit system.

6.11 Unification of the two cooperative systems is desirable but represents an enormous and complex task which, to avoid disrupting ongoing operations, should be carefully planned and phased. Assurances were therefore obtained - 30 - that reorganization of the cooperative credit system, if undertaken in the project area, would only take place in phases, on the basis of a detailed plan, satisfactory to IDA. BSBL would need considerable strengthening before it could assume the task of sole refinancing agency for cooperative credit, including refinancing project credit (para 2.24). GOB has therefore agreed that Sonali Bank would continue to refinance TCCA/KSS in the project area for the time being and that participation of BSBL in the project, if eventually considered desirable, would be subject to successful implementation of a development and strengthening program satisfactory to IDA. To assist BSBL in carrying out such program, the project would provide two consultants; a management expert for 10 man-months and a cooperative credit expert for 8 man-months, who would be appointed by March 31, 1982 (para 4.15).

6.12 BSBL would need staff restructuring and reorganization and establishment of regional offices should also be considered. However, in addition, financial rehabilitation would be needed in view of low capital base and high level of loan default (para 2.24). Measures to be considered for such rehabilitation should include:

(a) Determination during 1981-83 of balances of short-term loans granted prior to 1974/75 and overdue installments of other loans at June 30, 1975, placing them into a special suspense account and by conversion of GOB loan to BSBL, credit an equal amount to bad debt reserves;

(b) Increase of paid in capital to Tk 50 M by a GOB injection of at least Tk 29.8 M through payment of Tk 15 M in 1981/82 and Tk 14.8 M in 1982/83 partly by converting remaining GOB loans to paid in capital; and

(c) Annually, starting in 1982/83, transfer of loan payments overdue five years or more as under "a" above by conversion in the same year an equal amount of GOB loan to bad debt reserves.

Proposals for Improving TCCA/KSS Cooperatives Operations

6.13 Constraints to TCCA/KSS cooperative development due to existing criteria that determine loan eligibility of the cooperatives, were discussed in para 2.22. The GOB/IDA review mission of the cooperatives recommends considerable changes such as eligibility based on internal resources of the cooperatives, including a part of the members' savings and on performance of individual TCCA/KSS. The review also recommends TCCA/KSS lending for all agriculture related production purposes including some, like sugarcane production and fisheries, which are, at present, reserved for special agencies. However, such sweeping changes require careful study and phased introduction. For that purpose, Bangladesh Bank would establish a working party with membership from Ministries of Finance, Local Government and Cooperatives, and Agriculture, IRDP, and Sonali Bank that would co-opt representatives of other agencies or the public as necessary. The project would finance 12 man-months technical assistance for employment of a cooperative agricultural credit specialist to conduct studies of the impact of existing criteria and procedures, on which proposals for changes would be based. He would help with - 31 - planning and subsequentimplementation of those changes. His work may neces- sitate several short assignments. The study and planning period would require about one year and subsequent implementationwould be over a two-year period. The working party would initiate the study not later than December 31, 1981 by which time the consultantwould also have been appointed. To ensure that improvementsare implementedas soon as possible,assurances were obtained that, by December 31, 1982, GOB would furnish a plan, based on the study and satisfactoryto IDA, for improving loan eligibilitycriteria of TCCA/KSS and planning of lending operations. The plan should include a timetable for prompt implementationof its recommendations.

Lending Terms and Conditions

6.14 Loans to final borrowerswould, as far as possible not be in cash, but instead in the form of payment for authorized and verified construction or equipmentpurchase. Lending terms and conditionsare detailed in Schedule "A" and were agreed at negotiations. They would form part of the participation agreement between BB and participatingcredit institutions(para 6.06). Interest charged to final borrowerswould be not less than 13% on loans channelleddirectly through BKB and CB and not less than 14% on loans channeled through the TCCA/KSS system of cooperatives. The higher rate for cooperatives lending is justifiedbecause of additional services to borrowerswhich make borrowingmore accessible and convenient.Projections of future inflation rates indicate that these interest rates would be positive in real terms. Although overall inflationhas been estimated at over 17% during FY80, when rice prices increased sharply in response to the severe drought and serious crop shortfalls,the agriculturalsituation has improved considerablyin FY81 and inflationfor the year as a whole is currently projectedat slightly over 8%. For the medium-termfuture, aggregate price levels are expected to rise on average by about 8-10% annually. In view of possible changes in inflation rates, consultationson interest rates would be undertaken,between GOB and IDA from time to time.

6.15 Interest spreads at 1% for BB; 7% for CB and BKB for direct lending; 2-1/2% for Sonali for refinancingTCCA/KSS loans and 7-1/2% for TCCA/KSS would cover lending costs and ensure reasonable returns to participatingagencies. Borrowers' contributionwould be 5% by groups borrowing through cooperatives or small farmers or landlessborrowers, and 10% by other borrowers. The contributionsto be made for different investmentsby borrowers and participating institutionsand annual interest rates to be paid by them are illustrated in the followingschedule: - 32 -

L o a n s f o r STW, Village Mechanics' Tools, Grain Storage and Diversified Lending and Workshop Equipment ------By ------By---- Small Farmers Other All Borrowers Contribution and Groups Borrowers

Borrowers' Contribution minimum 5% 10% 10% TCCA/KSS Loans /a up to 95% 90% 90% Sonali Bank Refinance /b up to 100% of TCCA/KSS Loan - CB and BKB Loans /a up to 95% 90% 90% BB Refinance up to 90% of CB and BKB Loans and Sonali Bank Refinance GOB On-lending ------75% of BB Refinance------IDA Disbursement ------75% of BB Refinance------

Annual Interest Rate

TCCA/KSS Loans /a ------14%------… Sonali Refinance /b …--6.5%------…------CB and BKB Loans /a ------13%------…-- BB Refinance a) 6% to CB and BKB for direct lending b) 4% to Sonali Bank for refinancing TCCA/KSS

GOB Loans to BB a) 5% for refinancing CB and BKB for direct lending b) 3% for refinancing Sonali Bank for refinancing TCCA/KSS loans

IDA to GOB ------Standard------

/a Loans to final borrowers. /b Sonali Bank refinance to TCCA/KSS for loans to members.

6.16 Loan repayment would be according to ability of borrowers to repay, but would not exceed the life of the asset and would also be on concessionary terms for groups and small farmers. Typical examples of repayment periods for different loans would be: 9 years including up to 18 months' grace period for KSS or small farmers for STW loans, and up to 7 years for others; 7 years for mechanics tools; 12 years including 1 year's grace for workshops equipment; and up to 15 years including 2 years' grace for grain stores loans. Security would be according to agreement between Bangladesh Bank and participating Banks.

6.17 Concessionary terms by way of smaller contributions and longer repayment periods are designed to attract large-scale participation by small farmers and cooperative groups and assurances were obtained that at least 50% of lending would be to groups, small farmers 1/ or landless borrowers.

1/ Defined as owning not more than three acres of land. - 33 -

Training

6.18 Training,particularly in methods of appraising,supervising and recoveringlong-term loans would be one of the most important institution building project components. About 1,000 management and field staff would require such training over the project period. The training cell of the Bangladesh Bank Project Division (para 6.03), supported by a consultant, would plan and direct the training program outlined in para 4.14.

The Role of BADC

6.19 Field staff of BADC would assist TCCA/KSS in technicalappraisal and certificationof satisfactorycompletion of STW and, if necessary, identification of suitable STW drillers.BADC has the staff and ample experiencefor this task.

Project Coordination

6.20 While Bangladesh Bank would be responsiblefor executing the project and for coordinatingactivities of participatingagencies, there would be a project and district coordinatingcommittees to help keep all participating and supportingagencies informed;deal with problems that BB could not settle; review work programs and progress;and deal with policy issues. The Project Committeewould include: The Secretaryfor Agricultureas Chairman,and Secre- taries or senior representativesof the Ministry of Finance; Local Government, Rural Developmentand Cooperatives;Director General of IRDP, Chairman BADC, head of each participatingbank and the head of BB Project Division. The Project Director would be convener and secretaryand would provide the Commit- tee Secretariat.

6.21 Each District CoordinationCommittee would be chaired by the Deputy Commissionerand would have representationfrom BB, IRDP, other participating banks, BADC and Department of Agriculture. Meetings of both committeeswould be held as frequentlyas necessary, but not less frequentlythan once every three months. Establishmentof the committeeswould be a condition of effectiveness.

Tubewell Spacing and GroundwaterMonitoring

6.22 Because of rich groundwaterresources the aquifer would not be exhausted in most areas, even if each farmer pumps enough water to irrigate all his land, and there is little chance of interferencebetween STW. Spacing would thereforebe more on economic than technicalgrounds. In general a distance of about 500 ft between STW could be used as a rule of thumb but closer spacing would also be acceptable,and STW siting would be responsibility of the Banks. To keep check of installed tubewellsand to facilitate monitoring, each well should be marked on the thana irrigationmaps which have been made under the Shallow Tubewell Project. BADC is maintainingthese maps at present, but GOB is consideringwhether they should not be maintained by a local government body such as the Thana Council. GOB would ensure that the maps would be maintained at all times by a competent agency; while Bangladesh Bank would ensure that all facilitiesfinanced by the project would be marked on the maps. - 34 -

6.23 The greater part of the project area is suitable for STW, except for a relatively small part, roughly indicated on Map IBRD 15591, in which only use of DTW could provide large-scale irrigation. Because of high cost of DTW, GOB finds it necessary to subsidize DTW sales or rentals to farmers heavily. Consequently, to optimize results from scarce development resources, DTW construction should be confined to areas unsuitable for STW. Furthermore, DTW pumping causes considerable drawdown of water levels, which could interfere with STW operations. The two types of tubewells should not, therefore, be constructed in the same area. This reinforces arguments for limiting DTW to areas unsuitable for STW, which need to be defined. Assurances were therefore obtained that GOB, before December 31, 1981, would define localities in the project area that, on geohydrological grounds, would not be suitable for STW development and agree such areas with IDA, and would not allow any DTW construction that would adversely affect STW irrigation. DTW construction would virtually be confined to areas unsuitable for STW.

6.24 At present the Groundwater Circle of the Bangladesh Water Develop- ment Board is responsible for groundwater survey and monitoring. It has a competent technical staff and has benefitted from UNDP financed technical assistance and training. BADC, the main tubewells construction agency is also monitoring many of its existing wells and is responsible for supervising groundwater computer modelling in the project area by consultants financed by IDA. The model was made in 1978 and is now being updated and, if continually updated, as intended by GOB, on the basis of accurate thana maps, should provide a good tool for groundwater resource management. It would be used for annual planning of district and thana groundwater development programs. At present there is no urgent reason for transferring the model to another agency, but in time the groundwater survey and monitoring agency should take over responsibility for it. Both the Groundwater Circle and the BADC monitoring unit are part of a tubewells construction agency. Experience in other countries has shown that the survey and monitoring agency functions best when independent from construction agencies. GOB is therefore considering trans- forming the Groundwater Circle into a directorate under the Irrigation Ministry and giving it sole responsibility for groundwater survey and monitoring. IDA would strongly support such development.

Reporting Requirements and Evaluation

6.25 The Bangladesh Bank would prepare quarterly progress reports covering all aspects of the project. The format would be mutually acceptable to GOB and IDA and reports should reach IDA within two months after the end of the reporting quarter. These reports would constitute a monitoring system for GOB and IDA of the progress of the project. In addition, studies would be required to measure the impact of the project on agricultural production, rural incomes, employment and to identify different beneficiary groups. Such studies would be conducted or commissioned by the evaluation cell of the Bangladesh Bank Project Division. The studies would form part of the project completion report covering all aspects of the project including performance of all participating agencies, to be prepared within six months of the completion of the project. Assurances were obtained that the above reporting procedure would be observed and that evaluation studies would commence by September 30, 1982. - 35 -

Accounts and Audits

6.26 Bangladesh Bank, and other participating credit institutions would maintain separate records of project expenditure, which together with main accounts of BB, BKB and CB would be audited annually by auditors acceptable to IDA. Audited project accounts of BB and annual accounts of BKB and CB together with auditors' comments would be sent to IDA within six months of the close of each fiscal year. Because of large number of TCCA and KSS involved, BB would be responsible for ensuring maintenance of adequate accounts and completion of satisfactory audits. Assurances were obtained that the above accounting and auditing procedures would be followed. Auditing procedures of participating institutions are satisfactory, but auditing of cooperative credit institutions in the project area is not up to date. Assurances were therefore obtained that the GOB Registrar of Cooperatives would: (a) by December 31, 1981 prepare an inventory of TCCA/KSS cooperatives in the project area showing the date of last audit for each and prepare a phased plan for bringing the audit up to date by June 30, 1983, with the plan indicating the number of auditing staff to be used and the number of cooperatives to be audited each year; and (b) submit a quarterly report on progress of the audit program to reach BB not later than one month after the end of each calendar quarter, for forwarding to IDA.

VII. PRODUCTION MARKETING, PRICES AND FINANCIAL PROJECTIONS

Production

7.01 Project irrigation investments for tubewells are expected to be confined to Barind and the other shallow flooded parts of the project areas. In the deep water rice areas, where irrigation would allow only substitution of the deep water or mixed deep water/aus paddy crop by boro, returns to irrigation investments are low and may even be negative. The main effect of irrigation in the Barind by contrast would be to add a boro crop to the present t. aman dominated cropping pattern and in the other shallow flooded areas to add t. aus (in partial replacement of B. aus) to an already fairly diversified agricultural system. There would also be a small increase in t. aman production mainly by enabling farmers to irrigate during drought periods, which would give them confidence to put more land under HYV varieties and use more inputs. In addition, small increases in wheat, jute and horticultural crop production in most areas would be likely and in some localities increased production of such crops as tobacco and sugarcane. However, the relatively small production of pulses and oilseeds now grown on residual moisture after the aman crop would most probably be replaced by more profitable crops, when irrigation water becomes available. Cropping intensities, at present 115% in the Barind and 160% in the other shallow flooded areas would be expected to increase to 190% and 210% respectively with irrigation. Borrowers are projected to reach full benefits from increased production over four years--O% in year 1, 50% in year 2, 75% in year 3 and 100% in year 4. Cropping patterns, yield and production projections are shown in Annex 7, Tables I through 3. - 36 -

7.02 At project maturity, after about eight years from project start, the 27,000 STW would irrigate about 270,000 acres, based on 10 acres per STW. The shallow flooded areas outside the Barind are most suitable for STW, while part of the Barind can only be irrigated by DTW. The appraisal mission therefore estimates that only about 8,000 STW would be constructed in the Barind and the remaining 19,000 STW in other shallow flooded areas. While an STW with 0.5-0.75 cusec capacity would have enough water to irrigate 25 acres of land with the cropping patterns likely to be adopted, an average command area of only 10 acres per STW is projected because of difficulty of covering more land, even by sale of water, due to small farm size and high land fragmentation.

7.03 On the basis of assumptions in para 7.02, at project maturity, incremental foodgrain production is estimated to reach about 210,000 tons per annum consisting of about 180,000 tons clean rice (from 275,000 tons paddy) and 30,000 tons wheat. Current yield levels are based on Bangladesh Bureau of Statistics crop cutting data and cost and returns studies, and for deep water rice on special crop cutting studies conducted by the Bangladesh Rice Research Institute over the last four years. Future with project projections are broadly consistent with those of the numerous IDA supported agricultural projects in Bangladesh. Projected future paddy yield of 45 mds/ac (1.65 tons/ac) for 48,000 ac boro to be grown under the project and 40 mds/ac (1.45 tons/ac) for 114,000 ac t. aus are considered to be reasonable. They are slightly above officially recorded averages, which include partially or manually irrigated crops with lower yields.

Marketing and Prices

7.04 The traditional marketing system is well developed, but only about 20-25% of national agricultural production is estimated to enter the commercial market. There is a chain of primary markets usually within two miles of any village, where traders purchase all types of produce. Traders may also purchase at the farm gate. Small lots of produce are then aggregated and may be resold at larger secondary markets for distribution to processing plants or final markets. Because Bangladesh is far from food self-sufficiency, there is no danger that incremental grain from the project could not be sold. However, prices fluctuate from year to year, particularly in grain surplus areas. Prices well below GOB officially announced floor prices in good crop years discourage production in subsequent years. Partly to purchase more grain locally, in place of imports for its food distribution program and partly to stabilize prices, GOB through its Food Ministry has been stepping up grain purchases and may now procure about 10-15% of grain entering the commercial market. Its purchasing arrangements and storage facilities are not yet adequate for effective price stabilization, particularly in peak production years such as 1980/81. The ongoing Foodgrain Storage II Project (Credit 787-BD) and a proposed follow up project, which is under preparation, are designed to improve GOB's capacity to stabilize prices. The Agricultural Credit Project would also help by financing storage construction for the private sector to improve grain holding capacity in the project area. Horticultural produce is also sold and aggregated through the markets for distribution to urban centers. The market can be quickly glutted and that is why only a small part of the - 37 - farm is normally devoted to such crops. With the increase in the number of cold stores in the project area the potato crop is expanding and cold store operators often make purchasing arrangement with producers. No serious marketing problems are anticipated.

7.05 Government provides guaranteed support prices for paddy and wheat. The latest procurement price for 1980 for paddy is Tk 115 per maund and for wheat Tk 110 per maund. However, as already indicated, GOB is not yet able to ensure that farmers receive the guaranteed price and for that reason a five year average farmgate price of farm produce (1975/76-1979/80) has been used, expressed in 1980 taka for financial projections in this report (Annex 7, Table 4). Ruling 1980 retail prices have been used for purchased inputs as well as current rates for hired labor and working animals.

Financial Projections

7.06 Financial returns were calculated for four STW farm models (Annex 7, Tables 5 through 10). In each STW case, one set of models for each agricultural area (Barind and other shallow flooded areas) shows returns when the farmer irrigates the entire command area (10 acres per STW) and the other, when he irrigates five acres and sells water to neighbors for an additional five acres. Water sale price was assumed at cost plus 50% which gives water buyers satisfactory profits, increasing net returns per acre by about 70%, equal to about Tk 1,000 per acre. Returns to STW owners are satisfactory in both cases, ranging from 28% for the with water sales model to 40% for the fully owner cultivated model. Returns to farmers' equity taken at 10% of investment cost are very high--ranging from 85% to over 100%. Cash flow projections show that with a moratorium on principal for one year, borrowers can service their loans and complete repayment within 7 years, well within the life period of the investment estimated as being about 9 years for pumps and engines and possibly 15 for wells.

7.07 Sensitivity tests show that all models are highly sensitive to changes in gross production values; a 10% drop would reduce returns by between 7-10 percentage points. Returns are less sensitive to changes in investment cost or operating costs, for which a 10% increase would change returns by a range of 3-4 percentage points. The sensitivities were confirmed by calculating switching values of main variables that would reduce the rate of return to 12%, the estimated opportunity cost of capital in Bangladesh. The calculations showed these values to range between 20% and 27% for reduction in output value, only between 64% and 155% for increase in capital investment costs and between 38% and 47% in operating costs. Analysis also shows that even with only 5 acres under irrigation and no water sales, the IRR would still be acceptable at 17-19% but there would be little cushion in case of fall of revenue.

7.08 At present BB, on the behalf of GOB, draws up the annual, national short-term credit program for each bank. When all STW and DTW have been installed, total short-term credit to support full tubewells utilization is estimated at Tk 120 M per year, based on 50% of incremental operating costs of land irrigated by a tubewell. Adequacy of short-term credit for project borrowers would be kept under constant review by BB and the Project Coordina- tion Committee, to ensure that project borrowers would have adequate finance for crop production, to allow optimum use of STW in the project area. - 38 -

VIII. BENEFITS AND ECONOMIC EVALUATION

Benefits

8.01 Principal benefits would come from grain production, employment generation and effect on rural incomes (para 8.05). Annual incremental grain production at project maturity is estimated at 210,000 tons resulting from 270,000 acres irrigated by the 27,000 STW to be financed by the project. The increased grain production would make an important contribution towards endeavors by the people of Bangladesh to attain food self-sufficiency. The extra grain would represent a gross foreign exchange value of about US$80 M per annum and taking account of additional imported inputs would still represent US$60 M net foreign exchange value. Rapid realization of benefits is a particularly important aspect of the project. STW installation takes only two to three days and farmers obtain at least 50% of incremental benefits during the first year of operation. Therefore, development by the project of a long-term credit delivery system that can be replicated on a large scale, together with improvement of equipment supplies to the rural areas, would lay the foundations for greatly accelerated development of Bangladesh's rich groundwater resources. Such development is the key element of GOB plans to achieve and maintain food self-sufficiency. Benefits would also accrue from the minor lending components of the project by way of improving irrigation pumps maintenance, possibly with foreign exchange savings from local fabrica- tion of simple diesel engine spares. The experimental storage component could also become significant, if successful, as precursor to much larger lending to improve storage to preserve produce and stabilize prices, particularly in foodgrain surplus districts.

Economic Evaluation

8.02 The illustrative models used for financial analysis (para 7.06) have been adjusted for calculation of economic rates of return. Costs were adjusted to exclude subsidies and taxes. For internationally traded commodities, inputs and outputs, border prices were taken as an average of 1982-1990 forecasts derived from IBRD (November 1980) projections, expressed in 1980 constant terms, and adjusted for freight, handling and quality differential (Annex 8, Table 1). For non-internationally traded commodities or services, a standard conversion factor of 0.75 was applied to reflect their economic opportunity cost on the same basis as internationally traded goods. In view of seasonal unemployment or underemployment, labor costs (for family and hired labor) were taken at Rs 6.8, the rates calculated for several recent IBRD schemes and adjusted by the standard conversion factor. There is not as yet accurate information on the cost of lending in Bangladesh. Best estimates put the cost at about 6% of loan amount. To cover the expenses, 4% of total investment cost has been added to operating costs, in each model, based on loans of 90% of total investment cost and application of the standard conversion factor.

8.03 Economic rates of return (Annex 8, Tables 3 and 4) are higher than financial rates ranging from 57% to 63%. A weighted average ERR for the project is 60% based on 8,000 STW in the Barind and 19,000 STW in other shallow flooded areas. Rates show similar sensitivities to those in financial analysis; - 39 - from 10 to 12 percentage points reductionwith 10% drop in output value (or in produce prices and yields), only about 2 percentage points reductionwith 10% increase in investmentcosts and about 7-8 percentage points reductionwith 10% increase in total operatingcosts. In the unlikely event of a delay of one year in attaining project benefits,accompanied by only 33% reduction of incrementaloperating costs the ERR would still be 29% for STW in other shallow flooded areas, and 31% for STW in the Barind. Such delay must be consideredas a highly conservativeassumption, implying that the borrower attempts to operate the equipment in the year following construction,but fails to derive any benefits. In fact, delays in obtaining benefits from STW are rare since many farmers manage to increase productionwithin 3-4 months of STW construction. The above sensitivitieswere confirmed by calculating switchingvalues that would reduce the rate of return to 12%. Such reduction in returnswould result from 38% drop in output values (or in produce prices and yields); over 100% increase in investment costs and between 63% and 77% increase in operatingcosts including crop productionand tubewells operating costs.

Beneficiaries

8.04 On the assumption that at least half of the STW would be sold to groups of four to eight farmers and that even those sold to individualswould on average be operated by two or three farmers, as seems the case with past lending, about 100,000farm families would benefit from the project. Of the total rural population,about 50% are classifiedas landless or with less than half acre of land and of this group, farmers with small plots could benefit either as members of an STW group or even if they have no land, as water sales entrepreneurs. However, participationof this group may not be too large and it w-ld be better served by the Manually Operated Tubewells Project which has recently been appraised. The profile of project beneficiaries would, therefore,most probably resemble land ownershipdistribution in the project area (para 3.09). The project would ensure that at least 50% of investmentswould go to householdswith less than three acres. Evaluation surveys (para 6.25) would monitor composition of beneficiaries.

8.05 Because of intensified cropping,the project would generate considerable employment. At maturity, 80,000 additional labor years would be needed for farming operations,of which an estimated 40% would have to be hired labor. Income of participatingborrowers on the Barind is projected as increasing by about Tk 1,250 per acre from Tk 1,550 to Tk 2,800 after loan service and by about Tk 1,200 from Tk 2,000 to Tk 3,200 in other shallow flooded areas. Consequently,on a three acre farm, income would rise from Tk 2,300 to 3,100 (US$145-190)or US$24-32 per capita assuming an average family size of six, to between Tk 8,000 to Tk 9,000 (US$525and US$600) per year or about US$90-100 per capita, just above the estimated average income in Bangladesh. Rural incomes and employmentwould be further improved by complementaryactivities arising from tubewellsmaintenance and handling of increased amount of inputs and resultant crops. As elsewhere on the subcontinent,intensive minor irrigation,for which the project area is particularlysuitable, can transform poverty stricken people into a lively and reasonably prosperous communityand there appears to be every likelihood of such tranformationin the project area. - 40 -

Risks

8.06 Main risks are those facing any first project in a subsector. Firstly, there could be doubts whether BB will manage the project successfully and measures have been proposed (para 6.01 through 6.05) to establish a strong project implementation unit. A second risk is related to switching from traditional centralized public agency procurement for irrigation equipment to supplies being provided by the private sector according to market demand. Since the traditional method has been ineffective, there would be little-loss from switch to any other procurement system, but measures have been included for encouraging private sector participation and for constant monitoring of supplies pipeline (para 4.04 through 4.08). Conceivably, flow of supplies could be slower than anticipated, but is likely to develop in view of promising market opportunities for minor irrigation equipment. Finally, there is a risk of inadequate fuel supplies and GOB has assured the Association of high priority for diesel fuel imports to support food production. Credit for minor irrigation development has been highly successful on the subcontinent for achieving rapid increase in agricultural production with attendant increase in rural incomes and employment. In view of exceptionally rich groundwater resources in Bangladesh a similar program is very likely to succeed there too. Therefore, and because of high potential benefits, the risks described above are worth taking.

IX. RECOMMENDATIONS

9.01 Assurances were obtained at negotiations that:

(a) GOB would provide adequate open import licenses for STW equipment only to participating firms which would have an adequate distribution network in the project area and spares, repairs and STW construction facilities satisfactory to the BB (para 4.06);

(b) the programs for local training and training abroad, satisfactory to the Association would commence before November 30, 1981 (paras 4.13 and 4.14);

(d) BB would complete a participation agreement satisfactory to the Association with each participating credit institution (para 6.06);

(e) Bangladesh Bank would, before December 31, 1981, obtain accurate information on loan recovery status of each participating institution. If recovery of any outlet in the project area is less than 60% of demand, the institution concerned would develop a program satisfactory to BB and the Association for improving loan recovery; if less than - 41 -

40% and after December 31, 1981, 50%, the outlet would not be eligible for project refinance for as long as recoveries remain below those levels (para 6.09);

(f) GOB would develop, before December 31, 1983, performance criteria, to be agreed by IDA, to determine eligibility of any credit institute to receive GOB or BB refinance for agricultural lending (para 6.09);

(g) reorganization of the cooperative credit system in the project area, if undertaken, would take place on the basis of a detailed plan, satisfactory to IDA (para 6.11);

(h) by December 31, 1982, a plan satisfactory to IDA, to implement changes in TCCA/KSS cooperatives' loan eligibility criteria and loan program planning procedures would be furnished to IDA (para 6.13);

(i) lending terms and conditions detailed in Schedule "A" would be applied (para 6.14);

(j) at least 50% of project lending would be for small farmers (para 6.17);

(k) GOB, before December 31, 1981, would define localities in the project area that, on geohydrological grounds would not be suitable for STW development and agree such areas with IDA and would ensure that new DTW would not be constructed that would adversely affect STW (para 6.23); and

(1) reporting and auditing arrangements described in paras 6.25 and 6.26 respectively would be followed including strengthening of TCCA/KSS auditing arrangements in the project area to bring audits up to date (paras 6.25 and 6.26).

9.02 The following would be conditions of credit effectiveness:

(a) signing of a subsidiary loan agreement satisfactory to IDA by GOB and BB (para 5.03);

(b) employment of the Senior Supplies Officer, the Training Specialist, officers in charge of BB Project Department Wings and at least nine other professional staff for the Project Implementation Unit (para 6.04);

(d) establishment of the project and district coordination committees (para 6.21). - 42 - Schedule A Page 1

BANGLADESH

AGRICULTURAL CREDIT PROJECT

Lending Terms and Conditions

1. GOB to BB

(a) annual interest rate of 5% for BB refinancing participating bank lending directly to ultimate borrower and 3% for onlending through TCCA-KSS;

(b) repayment periods up to 15 years inclusive of up to 2 years' grace period; and

2. BB to Participating Banks

(a) interest rate to be not less than 6% per annum for direct lending and 4% for onlending through TCCA-KSS;

(b) installment repayments to coincide approximately with agreed collections from ultimate borrowers; and

3. Participating Banks to TCCA

(a) interest rate to be not less than 6-1/2%;

(b) installment repayments to coincide approximately with agreed collections from ultimate borrowers; and

4. Participating Banks to Ultimate Borrowers

(a) interest rate to be not less than 14% per annum to borrowers through KSS and not less than 13% to other borrowers;

(b) borrowers' contribution (including obligatory purchase of KSS shares, own labor and other contributions in cash or kind):

1/ Inclusive of loans to TCCAs. - 43 - Schedule A Page 2

(i) STW, other diversifiedlending and tools and equipmentfor village mechanics: a minimum of 5% of investmentcost by KSS groups and small farmers, 10% by other borrowers;

(ii) grain storage and tools and equipment for workshops: a minimum of 10% of investment cost;

(i) STW: 9 years inclusive of grace period of up to 18 months for lending to KSS groups and small farmers and 7 years inclusive of grace period of up to 18 months to others;

(ii) tools and equipment for workshops: 12 years inclusive of grace period of up to 1 year;

(iii) tools and equipment for village mechanics: up to 7 years;

(iv) grain storage: up to 15 years inclusive of grace period of up to 2 years;

(v) other purposes: 9 years for lending to KSS groups and small farmers and 7 years to others;

(d) technical standards and appraisal norms, as laid down by BB taking into considerationIDA guidelines where applicable,to be observed.

4. General

(a) BB, participatingbanks, TCCA-KSS to maintain separate accounts for lending under the project;

(b) TCCA-KSS to have their accounts audited in a manner satisfactory to BB; and to submit audited accounts to BB within six months of the end of their financialyear;

(d) for lending other than for STW, workshops equipment, village mechanic tools and storage, schemes prepared by participatingbanks must be acceptable to BB; - 44 - Schedule A Page 3

(e) any participating credit institute shall be financially sound, with staffing and organizational structure (including appropriate number of branch offices) satisfactory to BB and the Association;

(f) Agrani Bank would implement a loan recovery program satisfactory to BB and the Association;

(g) Bangladesh Bank shall:

(i) cease lending, to be refinanced out of the proceeds of the credit, to a participating credit institution, in respect of any branch thereof, whenever loan recovery by such branch over the preceding 12 month period falls below (a) 40% of demand until December 31, 1983 and (b) 50% of demand thereafter, until a loan recovery level of 40% or 50% of demand, respectively is attained by such branch; and

(ii) cause any participating credit institution to implement a loan recovery program satisfactory to BB and the Association, in respect of any branch thereof in the project area for which loan recovery drops below 60% of demand.

For the purpose of the above condition, "demand" means principal and interest falling due over the preceding 12 month period in question plus overdues from previous years.

(h) BKB would not lend for STW under this project in thanas covered by the Second Agricultural Credit Project agreed by GOB and BKB with ADB;

(i) Borrowers would use designs satisfactory to BB for the construction of grain storage; and

(j) BB would ensure that all STW financed under the project would be marked on the thana irrigation maps which are maintained by GOB or an appropriate GOB agency. - 45 -

Schedule B

Agreed List of Diesel Engine Mlakes for Sale to Project Borrowers

Deutz Kirloskar Krishi Kubota Mayur Mitsubishi Usha Yanmar - 46 -

ANNEX 1 Table 1 BANGLADESH

AGRICULTURAL CREDIT PROJECT

Recovery Performance of Credit Institutions _/ (in percentage) 2/

1975 1976 1977 1978 1979 1980

Nationalized Commercial Banks

Sonali Bank - - 70 72 57 72 Janata Bank - - 79 61 42 53 Agrani Bank - - 80 53 42 37

Bangladesh Krishi Bank 38 45 49 48 54 57

Bangladesh Samabaya Bank Ltd - 31 28 32 26 32 3' TRDP KSS - - - - 74 68 63

1/ The credit institutions do not have a uniform basis in computing overdues and the figures above may not provide an accurate basis for comparison.

2/ Amount recovered during the year against loans overdue at the beginning of the year plus loans falling due during the year.

3/ Principal only.

SOURCES: Sonali, Janata and Agrani Banks, BKB, BSBL and IRDP. -47- ANNEX 1 Table 2

BANGLADESH

AGRICULTURAL CREDIT PROJECT

Bangladesh Krishi Bank

Balance Sheets for Fiscal Years 1975/76 - 1979/80 (Taka MillMon)_

Assets 1975/76 1976/77 1977/78 1978/79 1979/80

Current Assets Cash on Hand and in Banks 12.3 49.1 92.5 181.1 221.8 Investments 36.5 52.5 22.5 50.0 58.0

A. Subtotal 48.8 101.6 115.0 231.1 279.8

Loans 713.8 864.7 1,147.0 1,510.6 2,419.0 Other Assets 44.5 90.3 144A8 135.0 233.2 Fixed Assets 3.6 6.5 11.1 15.3 27.9

B. Total Assets 810.7 1,063.1 1,417.9 1,892.0 2,959.9

Liabilities and Capital C. Current Liabilities 52.4 60.1 75.5 113.6 146.3 D. Deposits-Savings, Current 155.8 257.9 332.0 467.0 751.6 E. Borrowings from GOB, BB, and others 405.7 466.7 729.0 1,020.5 1,742.4

F. Total Liabilities 613.9 784.7 1,136.5 1,601.1 2,640.3

Paid up Capital 150.0 200.0 200.0 200.0 220.0 Reserves and Surplus 46.8 78.4 81.4 90.9 99.6

G. Total Capital 196.8 278.4 281.4 290.9 319.6

Total Liabilities and Capital 810.7 1,063.1 1,417.9 1,892.0 2,959.9

Ratios Liquidity Ratio Current Ratio (A over C) 0.66:1 0.88:1 0.76:1 0.99:1 Liquidity/Deposits(A over D) 0.31:1 0.39:1 0.35:1 0.49:1 0.37:1

Debt/Equity Ratio Long Term Debt/Equity (E over G) 2.06:1 1.68:1 2.59:1 3.50:1 5.45:1 Total Debt/Equity (F over G) 3.12:1 2.82:1 4.04:1 5.50:1 8.26:1

Average Assets 830.8 936.9 1,240.5 1,654.9 2,425.9 Average Equity 153.4 237.6 279.9 286.2 305.2 Average Loans 715.6 789.2 1,005.8 1,328.8 1,964.8

SOURCE: Bangladesh Xrishi Bank BANGLADESH

AGRICULTURALCREDIT PROJECT

Bangladesh Krishi Bank

Profit and Loss Statement--Fiscal Year 1975/76 - 1979/80 (Taka million)

1975/76 1976/77 1977/78 1978/79 1979/80

Income

Interest and Discounts 80.7 77.0 107.9 149.8 228.4 Other Income 0.9 1.9 5.3 8.7 12.7

Total Income 81.6 78.9 113.2 158.5 241.1

Expenditure

Interest Paid on Deposits and Borrowings 33.1 35.7 53.2 72.0 119.3 Salaries and Allowances 25.2 26.1 37.5 53.5 64.9 Other Aduinistrative Expenditure 6.4 8.9 12.8 15.7 25.3

Total Expenditure 64.7 70.7 103.5 141.2 209.5

Net Income 16.9 8.2 9.7 17.3 31.6

Ratios

Net Income/Gross Income 21% 10% 8% 11% 13% Net Income/Average Equity 11% 3% 3% 6% 10% Administrative Expense/Average Loans 4.41 4.43 5.0 5.21 4.59 Administrative Expense/Average Assets 3.80 3.74 4.05 4.18 3.72

SOURCE: Bangladesh Krishi Bank ANNEX I Table 4

BANGLADESH

AGRICULTURALCREDIT PROJECT

ConsolidatedBalance Sheet - Sonali, Janata and Agrani Banks

As of December 31, 1979 (Taka Million)

Sonali Janata Agrani Total Assets

Current Assets Cash on Hand and in Banks 885.0 995.8 724.7 2,605.5 Investment- ghort-term 187.2 199.9 638.9 1,026.0

A. Subtotal 1,072.2 1,195.7 1,363.6 3,631.5

Loans 5,754.0 6,268.9 2,710.5 14,733.4 Fixed Assets 100.2 55.9 37.3 193.4 Others 10,669.0 6,926.0 3,573.6 21,168.6

B. Total Assets 17,595.4 14,446.5 7,685.0 39,726.9

Liabilitiesand Capital

Current Liabilities Current Liabilities 1,222.0 794.6 310.8 2,327.4 Current Accounts 5,514.3 2,108.8 2,003.6 9,626.7

C. Subtotal 6,736.3 2,903.4 2,314.4 11,954.1

D. Deposit Savings (excludescurrent) 2,873.6 4,519.7 1,797.9 9,191.2 E. Borrowings from Bangladesh Bank 1,845.9 2,496.1 607.7 4,949.7 Others 6,049.6 4,425.4 2,889.0 13,364.0

F. Total Liabilities 17,505.4 14,344.6 7,609.0 39,459.0

Capital Paid-up Capital 30.0 30.0 30.0 90.0 Reserves 60.0 71.9 46.0 177.9

G. Total Capital 90.0 101.9 76.0 267.8

Total Liabilities and Capital 17,595.4 14,446.5 7,685.0 39,726.9

Ratios Liquidity Ratios Current Ratio (A over C) 0.16:1 0.41:1 0.59:1 0.30:1 Liquidity/Deposits(A over D) 0.37:1 0.26:1 0.76:1 0.40:1 Debt/EquityRatios Long Term Debt/Equity (E over G) 20.51:1 24.50:1 8.00:1 18:1 Total Debt/Equity (F over G) 1/ 119:1 92.70:1 61:1 92.50:1

1/ Excludes contra accounts in liabilities- Sonali Tk 6,797.0; Janata - Tk 4,899.8 and Agrani Tk 2,963.0.

SOURCES: Sonali, Janata and Agrani Banks - 50 - ANNEX 1 Table 5

BANGLADESH

AGRICULTURALCREDIT PROJECT

Consolidated Profit and Loss Statement - Sonali, Janata and Agrani Banks for the Year Ended December 31, 1979 (Taka million)

Sonali Janata Agrani Total

Income

Interest and Discount 511.1 603.8 279.5 1,394.4 Other Income 99.8 121.4 73.6 294.8

Total Income 610.9 725.2 353.1 1,689.2

Expenses

Interest on Deposits and Borrowings 275.9 375.1 153.3 804.3 Salaries and Allowances 168.1 148.6 112.1 428.8 Other Administrative Expenses 70.7 105.0 41.4 217.1

Total Expenses 514.7 628.7 306.8 1,450.2

Net Income 96.2 96.5 46.3 239.0

Ratios

Net Income to Gross Income 16% 13% 13% 14% Net Income to Average Equity 1/ 113% 100% 62% 93% Admin. Expense to Average Loans 2/ 5% 4% 6% 5% Admin. Expense to Average Assets 3/ 2% 3% 4% 3%

1/ Average equity for the 3 NCBs - Tk 85.4 million. 2/ Average loan for the 3 NCBs - Tk 4,360.6 million. 3/ Average assets for the 3 NCBs - Tk 7,348.5 million.

SOURCES: Sonali, Janata and Agrani Banks BANGLADESH

AGRICULTURALCREDIT PROJECT

Operations of IRDP Croopea

As of June 30., 19-80

1 75 1976 1977 1978 1979 1980

Nutber cs12eat>CO.^,j23 p.X-.:. mp ca4;ital (T'«lJcaginl)Lc-6^-<32 I I 3 13 n1 t 58 2, 4 7) 3? Arnwm of aovinfs and depoCol,to QC3loo :f:^t.edj ,>offiz ynatte,tCiers(feJite m-Illion)...... t .2-t' ', ...... 2 Nurterec cf 2sso borrowecl',oi Qireue ofSa., rs -lnanoeddr ing the year ('000C) 260. Ja0? 0 t ; 312* Loanp. Issued durinpg t-he year (1akT& Ylillion) Paddy T. Aman 88 1, im21900 33,1 242_7J 50.7 Boro 2115.9 27L9 28.9 48.1 45.4, 8510 AUs B Arian -i .5 5. 13.6 21.0 33(-I 543 Potato 0.3 0 .' 2.1 .1 5c7 5.8 Wheat _ - 0.6 2.5 4.04_ 8.2 Total Loans 26.5 45.1 64.2 108.8 122.4 20&.5

Recovery Performance - 47% 68% 63%

Average number of KSS per Thana 110 115 114 110 126 148 Average number of metbers per KSS 27 28 28 31 31 33 Percentage of KSS which borrowed to total number of KSS 35% 52% 53% 57% 46% 42% Average number of farmers financed per KSS financed 21 26 26 26 26 18 Percentage of farmers financed to total memership 28% 49% 48% 49% 38% 24%

SOURCE: IRDP -52 - ANNEX 1 BANGLADESH Table 7

AGRICULTURAL CREDIT PROJECT

Bangladesh Samabaya Bank Ltd. Balance Sheets 1975/76 - 1979/80 1/ (Taka Million)

Assets 1975/76 1976/77 1977/78 1978/79 1979/80

Current Assets

Cash on hand and in banks 24.0 28.8 32.9 35.3 39.7 Investments 6.4 6.2 5.7 6.2 5.0 A Total Current Assets 30.4 35.0 38.6 41.5 44.7 Loans and Advances 335.9 343.9 382.6 464.6 566.3 Interest Receivable 77.5 92.1 108.8 129.7 156.2 Fixed Assets 2.1 2.0 2.0 2.1 2.1 Other Assets 36.3 42.0 37.4 45.0 51.3 B Total Assets 482.2 515.0 569.4 682.9 820.6

Liabilities and Capital

C Deposits 21.3 22.0 19.7 19.6 19.9 D Borrowings from Government, 330.5 336.9 367.7 451.6 545.7 Bangladesh Bank and Others 2/ E Other Liabilities 3/ 82.5 100.6 120.6 143.0 176.9 F Total Liabilities 434.3 459.5 508.0 614.2 742.5

Capital Paid in 4/ 16.5 16.5 16.5 16.8 20.2 Reserve and other funds 31.4 39.0 44.9 51.9 57.9 G Total Capital 47.9 55.5 61.4 68.7 78.1

Total Liabilities and Capital 482.2 515.0 569.4 682.9 820.6

Ratios:

Liquidity Ratio Current (A over C+E) 0.79:1 0.28:1 0.28:1 0.26:1 0.23:1 Liquidity/Deposits (A over C) 1.43:1 1.59:1 1.96:1 2.12:1 2.25:1 Debt/Equity Ratio (F over G) 9.07:1 8.28:1 8.27:1 8.94:1 9.51:1 Recovery Performance: On all loans (overdue & current) 30.7 27.6 32.3 26.2 31.8 On current loans 60.6 54.8 70.0 59.7 68.1 Average Equity 47.8 51.6 58.4 65.1 73.4 Average Loan 335.9 340.0 363.2 423.6 515.4 Average Assets 482.2 498.6 542.2 626.2 751.8

1/ Fiscal year July 1 to June 30. 2/ Includes Government Bangladesh Bank and commercial banks borrowing: after 1977 loans are obtained only from GOB and BB. 3/ Interest on borrowings and deposits of which about 98% are interest payable on GOB and BB borrowing. 41 TK 4.5 million paid in by GOB.

SOURCE: Bangladesh Samabaya Bank Ltd. - 53 - ANNEX 1 Table 8

BANGLADESH

AGRICULTURAL CREDIT PROJECT

Bangladesh Samabaya Bank Ltd. Profit and Loss Statement 1975/76 - 1979MO-R/ (Taka million)

1975-76 1976-77 1977-78 1978-79 1979-80

Income

Interest and Discount 27.5 28.1 28.9 31.9 40.1 Other Income 7.5 6.9 7.5 7.4 8.7

Total Income 35.0 35.0 36.4 39.3 48.8

Expenditures

Interest paid on deposits and borrowings 26.9 25.5 27.0 29.3 38.4 Salaries and allowances 0.6 1.0 1.3 1.8 1.7 Other administrative expenditures 1.2 0.8 0.9 1.1 2.7

Total Expenditures 28.7 27.3 29.2 32.2 42.8

Net Income 6.3 7.7 7.2 7.1 6.0

Ratios

Net Income/Gross Income 18% 22% 19.7% 18% 12.2% Net Income/Average Equity 13% 15% 12.3% 11% 8.1% Administrative Expenses/Average Loans 0.5% 0.5% 0.6% 0.7% 0.8% Administrative Expenses/Average Assets 0.3% 0.3% 0.4% 0.4% 0.5%

1/ Fiscal year July 1 to June 30.

SOURCE: Bangladesh Samabaya Bank Ltd. BANGLADESH

AGRICULTURAL CREDIT PROJECT

Merit Criteria for KSS

Criteria Classification of KSS

A B C D E

Minimum coverage of farm families excluding absentee landlords 60 50 40 30 up to 30

Minimum proportion of members on roll of KSS who must make a weekly saving of at least 50 paise 80 60 50 40 up to 40

Minimum proportion of members who must contribute at least one share annually 80 60 50 40 up to 40

Minimum proportion of members who must use credit facility of KSS 80 60 50 40 up tp 40

Minimum proportion of recovery of credit 80 60 50 40 up to 40

Minimum proportion of attendance of KSS chairman, manager and model farmer at weekly classes conducted at thana training and development center 80 60 50 40 up to 40 D X

Source: IRDP Directorate. BANGLADESH

AGRICULTURAL CREDIT PROJECT

Land Utilization NW Region - 1978/79 (Area in '000 Acres)

1/ Irrigated 1/ 1/ Not- Cultu 1/ Total Area from Irrigated Net- Total-/ Total Culti- able- Current- Area Power Area from Cropped Cropped District Area vatable Forest-V Waste Fallows Irrigated Pumps Tubewells Area Area

Rajshahi 2,339 503 7 72 59 258 76 15 1,699 2,176 Dinajpur 1,670 296 24 62 167 125 25 36 1,156 1,681 Rangpur 2,371 521 5 84 84 174 14 25 1,689 3,124 Bogra 961 215 - 2 41 140 26 48 720 1,160 Pabna 1,201 233 _ 1 47 60 38 9 922 1,449

Total 8,542 1,768 36 221 398 766 179 133 6,186 9,590

Net Cropped Area = 72% Total Area (vs. 59% nationwide, or 67% excluding Chittagong Hill Tracts and the Sundarbans)

Cropping Intensity = 155 (vs. 153 nationwide) (Total Cropped Area * Net Cropped Area)

Irrigated Area = 12% Net Cropped Area (vs. 18% nationwide) Total Rice Area = 75% Gross Cropped Area

1/ There is little variation from year to year: 1976/77 to 1978/79 3-year average figures are similar to 1978/79 figures.

SOURCE: Bangladesh Bureau of Statistics, Monthly Statistical Bulletin of Bangladesh, Vol. IX, No. 8, August 1980. Bangladesh Bureau of Statistics, 1979 Statistical Yearbook of Bangladesh.

t 1 BANGLADESH

AGRICULTURAL CREDIT PROJECT

Production of Major Crops - NW Region 1/

Raishahi _ Dinajpur Rangpur Bogra Pabna Total Crop Acreage Yield Production Acreage Yield Production Acreage Yield Production Acreage Yield Production Acreage Yield Production Abreage Yield Production Rice B. Aus (Local) 2/ 458 0.34 154 452 0.35 158 967 0.31 295 265 0.29 78 358 0.30 106 2,500 0.32 791 I. Aus (HYV) 2/ 20 1.05 21 24 0.96 23 39 0.90 35 32 0.75 24 4 1.00 4 119 0.90 107 B. Aman (Local) 4/ 356 0.37 131 11 0.45 5 71 0.44 31 5 0.40 2 348 0.28 98 791 0.34 267 T. Aman (Local)21 661 0.45 300 743 0.50 382 1,121 0.50 561 524 0.51 268 137 0.48 66 3,186 0.49 1,577 T. Aman (HYV) 3/ 35 0.86 30 48 0.88 42 104 0.96 100 44 0.84 37 20 0.95 19 251 0.91 228 Boro (hYV) 5/ 64 1.09 7.0. _11 1.00 11 42 0.81 34 42 1.00 42 27 1,07 29 186 1.00 186

Total Rice 1,594 0.44 706 1,289 0.48 621 2,344 0.45 1,056 912 0.49 451 894 .38 322 7,033 0.45 3,156

Wheat HYV 5/ 6/ 29 0.79 23 32 0.78 25 27 0.74 20 25 0.84 21 33 0.80 26 l46 0.79 115 Jute 7/ 60 0.46 28 68 0.60 41 317 0.59 187 49 0.51 25 79 0.56 44 573 0.57 325 Potatoes 21 2.45 52 21 2.56 55 25 3.51 87 24 2.89 69 6 2.21 13 97 2.85 276 Rape & Mustard 9/ 50 0.24 12 49 0.22 11 45 0.29 13 11 0.27 3 44 0.30 13 199 0.26 52 Khesari 2/ 21 0.33 7 1.5 0.27 0.4 10 0.30 3 4 0.25 1 49 0.35 17 85.5 0.33 28.4 Tobacco 2/ 1.7 0.35 0.6 0.23 0.7 72 0.44 32 0.7 0.29 0.2 2 0.40 0.8 79.4 0.43 34.3

Total Other Crops Area 183 174 496 114 213 1,180

1/ Acreage in '000 acres; yield in tons/acre (for rice as clean rice equivalent); production in '000 tons. 2/ 3-year average (1975/76-1977/78) 3/ 3-year average (1977/78-1979-80) 4/ Crop-cutting surveys by the Bangladesh Rice Research Institute (BRRI) show a national 3-year average B. Aman rice yield of 0.62 tons per acre, with N. Bengal close to the average. 5/ 4-year average (1975/76-1978/79) 6/ HYV wheat acreage has increased rapidly each from the 1977/78 crop season. 7/ 4-year average (1976/77-1979/80 8/ 2-year average (1977/78-1978/79) 9/ 3-year average (1974/75-1976/77).

SOURCE: Bangladesh Bureau of Statistics, Monthly Statistical Bulletin of Bangladesh, Vol. IX, No. 8, August 1980. Bangladesh Bureau of Statistics, 1979 Statistical Yearbook of Bangladesh. BANGLADESH

AGRICULTURAL CREDIT PROJECT

Project Cost (Taka Million)

Foreign Exchange Local Unit Price Year 1 Year 2 Year 3 Year 4 Total % Amount Cost ('000)

223.2 669.6 55 368.3 301.3 ShallowTubewells 24.8 49.6 124.0 272.8 (2,000) (5,000) (11,000) (9,000) 7.1 23.7 75 17.8 5.9 Workshop, Tools and Equipment 742.5 2.4 4.7 9.5 (5) (10) (20) (15) 1.6 5.5 60 3.3 2.2 Mechanics Kit 11.0 0.6 1.1 2.2 (50) (100) (200) (150) 16.8 15 2.5 14.3 Storage 840.0 4.2 6.7 5.9 10.0 32.0 45 14.4 17.6 Other DiversifiedLending - 5.0 5.0 12.0 - 9.0 100 9.0 - Consultancy 160,000/man mo. 4.5 4.5 - 4.8 100 4.8 - Fellowship 1.6 1.6 1.6 - 11.2 20 2.2 9.0 Local Training Cost 2.0 3.5 3.5 2.2

250.0 772.6 55 422.3 350.3 Base Cost 65.7 148.6 308.3 226.2 55 124.4 101.8 Price Contingencies 7.7 30.0 91.6 96.9 998.8 55 546.7 452.1 Total Project Cost 73.4 178.6 399.9 346.9

D >4 - 58 - ANNEX 3 Table 2

BANGLADESH

AGRICULTURALCREDIT PROJECT Shallow Tubewell Cost 1/

------Taka ------US$ ------Locall' Foreign Total Local3 Foreign Total

Diesel Engine (5-6 HP) 1,459 6,080 7,539 91.2 380.0 471.2 Pump (3/4 cusec with coupling etc.) 2/ 1,124 1,686 2,810 70.2 105.4 175.6 GI Pipe (4") 60 rft. 1,498 2,248 3,746 93.6 140.5 234.1 Strainer (4") 40 rft. 2,240 3,360 5,600 140.0 210.0 350.0 Tubewell accessories 1,260 - 1,260 78.8 - 78.8 Drilling and Commissioning 1,450 - 1,450 90.6 - 90.6 Handling and Transport 300 - 300 18.8 - 18.8 Contractor's markup 4/ 2,095 - 2,095 130.9 - 130.9

TOTAL 11,426 13,374 24,800 714.1 835.9 1,550.0

1/ 100 rft STW, 60 rft blind pipe, 40 rft GI core brass strainer. 2/ BMTF (Bangladesh Mallines Tool Factory), Govt. owned company manufacturing pumps whose prices are below privately owned pump factories. Local component about 40%. 3/ Local cost includes Govt. levies, import duty, drilling cost, handling, markups and local costs in producing pumps. 4/ 10% on items 1 to 5 representing contractor's recommendation for sieves.

Source: BKB -59 - ANNEX 3 Table 3

BANGLADESH

AGRICULTURALCREDIT PROJECT

Workshop Tools and Equipment Cost (Tk)

Quantity Unit Cost Total

Nozzle Tester 1 6,500 6,500 Electric Welding Set - 300 Amperes 1 19,000 19,000 Gas Welding Set with Accessories 1 16,000 16,000 Multi-PurposePrecision Lathe 1 123,000 123,000 Electric Bench Drill 1 12,500 12,500 Electric Bench Grinder 1 23,000 23,000 Fitters Vices 4 600 2,400 Hydraulic Jacks 2 2,300 4,600 Diesel Engine Compressor Tester 1 3,700 3,700 Tool Boxes 15 6,500 97,500 Hand Grease Gun 3 800 2,400 Micrometer (2), Vernier Calipers (1) 1 Set 19,000 19,000 Tapes (2), and rules (2) Lathe Tools 10 250 2,500 H.S.S. Drill Bit - set 2 600 1,200 12 piece set of taps and dies 1 4,300 4,300 Piston Ring Band Spanner 2 300 600 Valve Spring Pliers 2 200 400 Stud and Bolt Extracter set 2 200 400 Hand Drill 2 600 1,200 Soldering Iron 2 1,500 3,000 Pipe Wrenches 4 1,500 6,000 Utility Knives 4 200 800

Total C.I.F. Cost 350,000

Import Duty 15% 52,500 Handling 20% 70,000

Total 472,500 -60 - ANNEX 4

BANGLADESH

AGRICULTURAL CREDIT PROJECT

Disbursement Schedule (US$ millions)

Disbursements Fiscal Year/Quarter Quarterly Cumulative

1981/82 First Quarter 1/ Second Quarter - - Third Quarter 0.1 0.1 Fourth Quarter 0.2 0.3

1982/83 First Quarter 0.2 0.5 Second Quarter 0.1 0.6 Third Quarter 2.0 2.6 Fourth Quarter 3.2 5.8

1983/84 First Quarter 2.7 8.5 Second Quarter 1.0 9.5 Third Quarter 4.4 13.9 Fourth Quarter 5.2 19.1

1984/85 First Quarter 2.7 21.8 Second Quarter 1.0 22.8 Third Quarter 5.0 27.8 Fourth Quarter 6.0 33.8

1985/86 First Quarter 4.0 37.8 Second Quarter 2.2 40.0

1/ Signing date expected about July, 1981. - 61 -

ANNEX 5 Page 1

BANGLADESH

AGRICULTURAL CREDIT PROJECT

Functions of Project Implementation Unit

1. The Project Implementation Unit would have three Wings each headed by a senior officer which would be: a Planning Wing, an Operations Wing and a Monitoring and Evaluation Wing. The Operations Wing would be mainly involved in day-to-day management of the project with support from the other Wings.

2. The Planning Wing would have three cells--a Policy Cell staffed by bankers; a Technical Cell with groundwater and farm management experts initially, with other technical experts to be added at later date; and a Training Cell which would plan and supervise the project training program. The Policy Cell would provide guidance on such matters as lending and refinancing criteria, lending terms and conditions, staffing norms, allocation of areas to various institutes, staffing norms and appraisal criteria and norms; and would also draw up policy circulars and documentation to be used in the lending operations such as loan application or loan appraisal forms. Together with the Technical Cell, it would develop or appraise new lending schemes to be refinanced by BB, ensuring technical, organizational and financial feasibility. The Tech- nical Cell would also be needed to support project operations, particularly on such matters as ensuring adequate groundwater monitoring arrangements and groundwater development planning, provision, in consultation with Bangladesh Water Development Board, BADC and BKB engineers, of STW designs suitable for different conditions in the project area, delineation of areas suitable for STW and suitability of irrigation equipment. BB should draw up a panel of consultants that could be hired to augment the expertise of the Technical Cell particularly for subjects for which employment of full time technical staff would not be warranted.

3. The Operations Wing would have a Supervision Cell staffed with banking staff that would be responsible for supervising project implementation; a Supply Cell that would have the very important task of ensuring an adequate supply of irrigation equipment in the project area and would also monitor sales of each approved dealer in the project area, adequacy of construction agencies, fuel supplies and other inputs supplies; and a Finance and Accounts Cell headed by a Senior Accounting Officer that would keep the project accounts, deal with claims for refinance from participating institutions, prepare claims for IDA reimbursement and lay down project accounting and refinancing procedures. The Operations Wing would also supervise sub-units that would be established in regional offices in due course, to intensify project supervision. - 62 -

ANNEX 5 Page 2

4. The Monitoring and Evaluation Wing would design reporting systems and would be responsible for obtaining management information, providing regular reports to management, preparing quarterly progress reports for use by the management and IDA and for preparing the Project Completion Report after the conclusion of the project. Initially the Wing would establish monitoring and reporting systems, but in the second project year, it would start evaluating project benefits by means of field studies and for this purpose would require suitably trained economists.

5. The Project Director who would be in charge of the Project Imple- mentation Unit should be appointed at a very early date. Apart from him the most urgent appointment, which is needed equally early, would be the Senior Supplies Officer, to organize early import, assembly and distribution of STW equipment. His most important tasks would be to ensure adequate participation by private firms and to ensure that they obtain necessary import licenses, foreign exchange and credit expeditiously. Other early appointments should include: the officer in charge of each Wing; a banking officer, groundwater engineer, farm management specialist and credit training specialist for the Planning Wing; two banking officers, an assistant supplies officer (to work with the Senior Supplies Officer) and the Senior Accounts Officer with appropriate supporting staff for the Operations Wing; and one officer to assist the officer in charge of the Monitoring and Evaluation Wing.

6. Important pre-project activities for Project Department Wings other than organizing equipment supplies, would be for the Planning Wing to draw up the project banking plan, establish project lending terms and conditions, refinance policies, participation criteria, loan appraisal criteria, implementation programs and targets, and to draw up the project training program; in particular to make early arrangements for short term study programs abroad to train the trainers of participating banks. In addition, the Finance and Accounts Cell of the Operations Wing needs to draw up accounting and financing systems, procedures and forms. - 63 -

ANNEX 6 Page 1

BANGLADESH

AGRICULTURALCREDIT PROJECT

Guidelines for Loan Accounting for Recovery Reporting Systems

1. At present, the systems used by CB, BKB, BSBL and TCCA/KSS for recording loan transactionsare not uniform. This results in varying methods of presentingloan recoveries,making comparison of performancebetween institutions quite difficult. The objective of measuring recovery performanceis to observe: (a) loan repayment discipline practiced by the borrowersand achieved by the banks; and (b) effect of overdues and doubtful loan accounts on the financialviability of the banks. The former is mainly ascertainable through overdue statistics,the latter partly by listing the overdues according to their age and partly, by comparing overdues or doubtful loan accounts with the amount of total loan portfolio and/or reserves. To achieve uniform presentationof loan recovery performance,participating banks may need to include the following features in their loan accounting systems:

(a) control accounts for short-term loans and medium and long- term showing separately current loans, collections,(both broken down into principal and interest)past dues and balances; total lending during the reportingperiod, total lending to date, and total loans outstanding;

(b) subsidiaryledgers for these control accounts which need to be kept up-to-date and record the same informationas in (a) above;

(c) records of all loans accounts for short-termloans and medium and long-term loans need to show the maturity dates of all loans granted;

(d) "past due" accounts to which all loans unpaid at maturity should be transferred. "Past due loans" control accounts for both short-termand medium and long-term loans should record collection broken down into principal and interest; and should be supportedby subsidiaryledgers for each "past due loans" control account;

(e) applicationof all payments first to accrued interest,if any, and only the balance to principal. (Interest income should not be credited unless interest is actually collected); and

(f) bad and doubtful loans accounts, to which an amount based on the aging schedule (para 3) could be credited regularly. - 64 -

ANNEX 6 Page 2

2. The following is information that needs to be included into the loan recovery performancereporting format during a reporting period (quarter, six months or one year):

Principal Interest Total

(a) Loan Portfolio:

1. Amount outstanding (Principal) XXX - XXX 2. Number of loans outstanding - - XXX

(b) Amount Due for Collection:

1. Arrears: (overdues at the beginning of the reporting period which can be taken from the past due control account or from the previous report) XXX XXX XXX

2. Current (amount due for recovery during the reporting period, to be taken from the short-termor medium and long-term control accounts) XXX XXX XXX

1. On arrears (from past due control account) XXX XXX XXX

2. On current (to be taken from short-termand medium and long-term control accounts) XXX XXX XXX

(d) Arrears at end of Year (to be Transferredto Next Report) XXX XXX XXX

(e) Recovery Percent - XXX

Recovery performanceexpressed as a percentage is the ratio of total collection to total amount due for collection. Advance collectionshould not be included in computing recovery performance percentage,but should be included among collectionsat the time the correspondingloan becomes due.

3. Together with the above format, an aging schedule of loans is needed for both short-termloans and medium/long-termlaons. The format would be the same for both types of loans except that long-term laons aging would cover a longer period. For example, a typical short-termaging schedule would be: - 65 - ANNEX 6 Page 3

Short-Term Loans

Amount (a) Overdue No. Principal Interest Total

1-6 months 6-12 months 1-2 years 2-3 years

Short-termloans overdue for three years or more should either be written off or transferredto a suspense account.

(b) A typical term loans' aging schedule could be:

Term Loans

Amount Overdue No. Principal Interest Total

Less than 1 year 1-2 years 2-3 years 3-4 years Over 4 years

4. Provisions for reserves against bad or doubtful loans should also be reported;and the ratio, as percent, of overdues to bad and doubtful loans reserves. - 66 - ANNEX 7 Table I BANGLADESH

AGRICULTURAL CREDIT PROJECT

Cropping Patterns

I II Other Shallow Barind Tract - _ Flooded Areas Paddy P v W P W

B. Aus (local) - - - 20 20 -

T. Aus (HYV) - - - - - 60

T. Aman (local) 80 75 70 80 70 60

T. Aman (HYV) 20 25 30 20 30 40

Boro (HYV) - - 60 - - -

Sub-Total 100 100 160 120 120 160

Other Crops

Wheat 5 10 20 10 15 20

Jute - - - 20 20 20

Pulses and Oilseeds 10 10 - 10 10

Potatoes - - 10 - - 10

Sub-Total 15 20 30 40 45 50

Total Cropping Intensity: 115 120 190 160 165 210

1/ P = Present; W = Future Without Project; W = Future With Project. - 67 - ANNEX 7 Table 2

BANGLADESH

AGRICULTURAL CREDIT PROJECT

Present Average Yields and Projected Future Yields f_ Crops in tbe Project_ Area_1/ _l_

Future Future Without With Present (P) Project (v) Project(W) Md/Acre Ton/Acre Md/Acre Ton/Acre Md/Acre Ton/Acre

Paddy

B. Aus (Local) 14 .51 14 .51 14 .51 T. Aus (HYV) 36 1.32 36 1.32 40 1.47 B. Aman (local) 2/ 25 .92 25 .92 25 .92 Aus/Aman Mixed 33 1.21 36 1.32 36 1.32 T. Aman (local) 20 .73 20 .73 22 .81 T. Aman (HYV) 25 .92 30 1.10 35 1.29 Boro (HYV) 40 1.47 45 1.65 45 1.65

Other Crops

Wheat (HYV) 20 .73 20 .73 27 1.00 Jute 16 .59 16 .59 22 .81 Pulses & Oilseeds 9 .33 9 .33 12 .44 Potatoes 85 3.12 95 3.49 120 4.41

l/ Derived from: Bangladesh Bureau of Statistics (BBS) Agro-Economic Research (AER), Ministry of Agriculture and Forests. Bangladesh Rice Research Institute (BRRI)

2/ Bangladesh Rice Research Institute (BRRI) Cropcut Surveys--1977, 1978 and 1979. BANGLADESH

AGRICULTURAL CREDIT PROJECT

Present and Future Crop Yield, Acreage and Production

Yield Production Incremental Production Crop (tonsLacre) Area ('000 Acres) ('000 tons) ('000 tons) __T ~~~~~ -f w Pddy Tr- w - X _ -- Pw w - ~~- w w=P ww B. Aus (local) 0.51 0.51 0.51 35.0 35.0 - 17.9 17.9 - (17.9) (17.9) T. Aus (HYV) 1.32 1.32 1.47 - - 114.0 - - 167.6 167.6 167.6 T. Aman (local) 0.73 0.73 0.81 211.2 189.2 170.0 154.2 138.1 137.7 (16.5) (0.4) T. Aman (HYV) 0.92 1.10 1.29 52.8 74.8 100.0 48.6 82.3 129.0 80.4 46.7 Boro (HYV) 1.47 1.65 1.65 - - 48.0 - - 79.2 79.2 79.2

Total Paddy 0.74 0.80 1.56 299.0 299.0 432.2 220.7 238.3 513.5 292.8 275.2

Other Crops 00

Wheat 0.73 0.73 1.00 22.3 35.3 54.0 16.3 25.8 54.0 37.7 28.2 Jute 0.59 0.59 0.81 35.0 35.0 38.0 20.6 26.6 28.4 7.8 1.8 Pulses and Oilseeds 0.33 0.33 0.44 26.4 26.4 - 8.7 8.7 - (8.7) (8.7) Potatoes 3.12 3.49 4.41 - - 19 0 - - 83.8 83.8 83.8

Total other Crops 83.7 96.7 111.0 Total Area Sown 382.7 395.7 543..0

Overall cropping Intensity (270,000 acres 142% 147% 201% farm land)

Total Food Grain Production Rice (Paddy X2) 147 159 342 195 183 3 Wheat 16 26 54 38 28

Total 163 185 396 233 211 x P - Present W - Future without Project W - Future with Project - 69- ANNEX 7 Table 4 BANGLADESH

AGRICULTURAL CREDIT PROJECT

Financial and Economic Prices

Financial Price Economic Price (Tk/md) (Tk/md)

CROPS 1/

Paddy: Aus 105 142 Am.an 115 153 Boro 105 142

Wheat 105 158 Jute 160 190 Pulses & Oilseeds * 170 128 2/ Potatoes 60 45 2/

INPUTS

Fertilizer: Urea 110 11/ 163 TSP 90 11/ 195 MP 70 11/ 131 Manure 2 1.5 2/

Pesticides 3,360 10,080 3/

Seed: 4/ Paddy (HYV) 160 212 Wheat (HYV) 170 236 Potatoes 120 90

Animal Power (pair-day) 22 16.5 5/ Hired Labor (man-day) 10 5.1 6/ 9/ Tubewell O&M: - STW 16.4 ( 8.2/hour) 14.3 ( 7.1/hour) 10/ (acre-inch) DTW 11.1 (22.2/hour) 9.7 (19.3/hour)

Sale of Water (per acre-inch) = Total Cost + 50%

Cropping Pattern I-STW 7/ 39 Costs include I-DTW 8/ 37.5 fuel, lubricants spares II-STW 7/ 45 repairs, amortization and interest charges. 1/ Financial prices derived from 5-year average (1975/76-1979/80) valued in 1980 Taka. 2/ Non-traded commodities adjusted by SCF = .75. 3/ Pesticides used are subsidized at about 65%. Therefore, the price used in the economic analysis is taken at the financial price. 4/ Local paddy varieties plus jute and pulses and oilseeds are valued at crop prices. 5/ Adjusted by SCF = .75. 6/ Economic wage of farm labor in view of periodic under and unemployment in agriculture computed by IBRD at Tk 6.8 and adjusted by SCF = 0.75. 7/ Assuming 10-acre command area. 8/ Assuming 70-acre command area. 9/ Fuel, lubricant, spares and repairs. 10/ Adjusted to take account of international prices. Local costs adjusted by SCF = 0.75. _1/ Reflects price increase of October 1980. BANGLADESH

AGRICULTURAL CREDIT PROJECT

Crop Production Costs per Acre at Financial Prices (Takas)

Aus/Aman B. Aus T. Aus B. Aman Mixed T. Aman T. Aman Boro Wheat Pulses & (local) (HYV) (local) (local) (local) (HYV) (HYV) (HYV) Jute Oilseeds Potatoes Pr 17 W 2/ PIP I/ 5 1/ fff I P 3/ W 4/ W 2/ W 2/ PC I/ W 2/ P'P 1/ W 2/ PT lj W 2/ W 2/

Seed 100 60 98 141 43 60 60 48 92 234 255 24 24 43 43 120 Fertilizer: Urea 83 179 28 83 55 83 83 110 206 165 220 41 55 28 55 165 TSP 45 122 11 45 25 34 34 47 162 90 113 16 11 23 50 68 MP 18 32 - 18 11 18 18 23 33 26 35 9 9 9 18 53 Manure 80 76 _ 80 42 50 50 56 242 50 100 40 80 40 60 200 Pesticides 42 84 42 42 42 42 42 84 84 - 42 - 42 - 42 84 Animal Power 484 572 484 572 440 440 484 528 550 396 528 418 440 264 330 990 Labor: Family 350 570 570 720 570 540 570 600 520 350 450 550 650 300 390 1400 Hired 170 380 280 330 430 410 430 450 500 150 250 350 450 40 60 400 Subtotal 520 950 850 1050 1000 950 1000 1050 1020 500 700 900 1100 340 450 1800 Other 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

Subtotal 5/ 1122 1605 1043 1411 1188 1237 1301 1446 1969 1211 1643 998 1211 547 758 2180 Irrigation 0 & M: Shallow Tubewell - 426 - - - - 31 684 - 323 - 72 - 365 365 Deep Tubewell ------21 463 - 219 - - - - 247

Cost of Farm Inpute: S/ STW 1122 2031 1043 1411 1188 1237 1301 1477 2653 1211 1966 998 1283 547 1123 2545 DTW 1122 - 1043 1411 1188 1237 1301 1467 2432 1211 1862 998 - 547 - 2427

Gross Value of Production (GVP) 6/ 1470 3780 2875 3665 2300 2875 3450 4025 4725 2100 2835 2560 3520 1530 2400 7200

Net Value of Production: STW 348 1749 1832 2254 1112 1638 2149 2548 2072 889 869 1562 2237 983 1277 4655 (NVP) DTW 348 - 1832 2254 1112 1638 2149 2558 2293 889 973 1562 - 983 - 4773

1/ P W = Present and future without project. 2/ W = Future with project. 3/P =Present 4/ H = Future without project. 5/ Excluding family labor. 6/ Yield (Table 2) X financial price (Table 4) - 71 - ANNEX 7 Table 6

BANGLADESH

AGRICULTURALCREDIT PROJECT

Five Acres Farm Model: Projected Income and Financial Returns

FARM DATA FOR CROPPING PATTERN NO. I - SHALLOW TUBEWELL Build-up Rate for net Command area : 5 acres owned by tubewell owner(s) incremental income: 5 acres not owned by tubewell owner(s) Year 1 0% Year 2 50% Total : 10 acres Year 3 : 75% Cropping Intensity : 120% without project Year 4 100% 190% with project Investment Cost : Tk 24,800 Tubewell Set Tubewell Operating Hours per Year : 635 Project Period : 7 years

------(Takas 1,000) --_ ------…------Without Project With Project 1-7 1 2 3 4 5-6 7 CASH INFLOW

Gross Farm Income 1/ 2/ 14.8 14.8 24.8 29.7 34.7 34.7 34.7 Off-farm Income (Sale of Water) - - - 3.1 4.7 6.2 6.2 6.2 Total 14.8 14.8 27.9 34.4 40.9 40.9 40.9

CASH OUTFLOW

Tubewell investment costs - 24.8 - - - - (2.5) -/ Operating costs 7.0 7.0 11.0 13.0 15.0 15.0 15.0 Tubewell 0 & M 3 - - 2.6 3.9 5.2 5.2 5.2 Incremental Working Capital -/ - 3.3 1.7 1.7 - - (6.7) Total 7.0 35.1 15.3 18.6 20.2 20.2 11.0

NET BENEFIT BEFORE FINANCING

Total 7.8 (20.3) 12.6 15.8 20.7 20.7 29.9 Incremental C28.1) 4.8 8.0 12.9 12.9 22.1 INTERNAL RATE OF RETURN = 29% FINANCING

Long term loan -/ - 22.3 - - - - - Short term loan 3.3 1.7 1.7 - - - Less: Debt Service Long term loan - - (2.9) (6.3) (6.3) (6.3) (6.3) Short term loan - - (3.5) (1.8) (1.8) - - Net Financing - 25.6 (4.7) (6.4) (8.1) (6.3) (6.3)

NET BENEFIT AFTER FINANCING

Total 7.8 5.3 7.9 9.4 12.6 14.4 23.6 Incremental - (2.5) - 0.1 1.6 4.8 6.6 15.8 Cumulative Incremental - (2.5) (2.4) (0.8) 4.0 17.2 33.0 INTERNAL RATE OF RETURN TO FARMER'S EQUITY = 85%

1/ On five acres owned by tubewell owner(s). 2/ On five acres not owned by tubewell owners. Water sold at cost + 50%. 3/ 50% of the increase in operating cost in the following year, assuming a double-cropping system. 41 90% of tubewell investment costs at 13% p.a. interest, with 1-year grace period. 5/ 10% salvage value. 6/ Farmers contribution to investment. - 72 -

ANNEX 7 Table 7

BANGLADESH

AGRICULTURAL CREDIT PROJECT

Ten Acres Farm Model: Projected Income and Financial Returns

FARM DATA FOR CROPPING PATTERN NO. I - SHALLOW TUBEWELL Build-up Rate for net incremental income:

Command Area . 10 acres owned by tubewell owner(s) Year1 : 0%

Cropping Intensity . 120% without project Year 2 : 50% 190% with project Year 3 : 75% Year 4 : 100% Investment Cost : Tk 24,800 Tubewell Set

Tubewell Operating Hours per Year : 635

Project Period . 7 years ------(Takas 1,000)------Without Project With Project 1-7 1 2 3 4 5-6 7

CASH INFLOW

Gross Farm Income 29.6 29.6 49.6 59.4 69.4 69.4 69.4 Off-farm Income (Sale of Water) ------Total 29.6 29.6 49.6 59.4 69.4 69.4 69.4

CASH OUTFLOW

Tubewell Investment Costs - 24.8 - - - - (2.5) -/ Operating Costs 14.0 14.0 22.0 26.0 30.0 30.0 30.0 Tubewell 0 & M - - 2.6 3.9 5.2 5.2 5.2 IncrementalWorking Capital -/ - 5.3 2.7 2.7 - - (10.7) Total 14.0 44.1 27.3 32.6 35.2 35.2 22.0

NET BENEFIT BEFORE FINANCING

Total 15.6 (14.5) 22.3 26.8 34.2 34.2 47.4 Incremental (30.1) 6.7 11.2 18.6 18.6 31.8 INTERNAL RATE OF RETURN = 40% FINANCING

Long term Loan - 22.3 - - - - - Short term loan 5.3 2.7 2.7 - - - Less: Debt Service Long term loan - - (2.9) (6.3) (6.3) (6.3) (6.3) Short term loan - - (5.6) (2.9) (2.9) _ _ Net Financing - 27.6 (5.8) (6.5) (9.2) (6.3) (6.3)

NET BENEFIT AFTER FINANCING

Total 15.6 13.1 4 16.5 20.3 25.0 27.9 41.1 Incremental - (2.5) - 0.9 4.7 9.4 12.3 25.5 Cumulative Incremental - (2.5) (1.6) 3.1 12.5 37.1 62.6 INTERNAL RATE OF RETURN TO FARMER'S EQUITY = OVER 140%

1/ 50% of the increase in operating cost in the following year, assuming a double-cropping system. 21 90% of tubewell investment costs at 13% p.a. interest, with a 1-year grace period. 3/ 10% salvage value. 4/ Farmers contribution to investment. - 73 - ANNEX7 Table 8

BANGLADESH

AGRICULTURAL CREDIT PROJECT

Five Acres Farm Model: Projected Income and Financial Returns

FARM DATA FOR CROPPING PATTERN NO. II - SHALLOW TUBEWELL Build-up Rate for net incremental income: Command Area : 5 acres owned by tubewell owner(s) 5 acres not owned by tubewell owner(s) Year 1 : 0% Year 2 : 50% Total : 10 acres Year 3 : 75% Year 4 : 100% Cropping Intensity : 165% without project 210% with project

Investment Cost : Tk 24,800 Tubewell Set

Tubewell Operating Hours per Year : 468

Project Period : 7 years

------(Takas 1,000)------

Without Project With Project 1-7 1 2 3 4 5-6 7

CASH INFLOW

Gross Farm Income 1/ 2/ 19.6 19.6 27.9 32.1 36.2 36.2 36.2 Off-farm Income (Sale of Water) - - - 2.7 4.0 5.3 5.3 5.3 TOTAL 19.6 19.6 30.6 36.1 41.5 41.5 41.5 CASH OUTFLOW

Tubewell Investment Costs - 24.8 - - - - (2.5) 5/ Operating Costs 9.4 9.4 12.3 13.8 15.2 15.2 15.2 Tubewell 0 & M 3 - - 1.9 2.9 3.8 3.8 3.8 Incremental Working Capital - - 2.4 1.3 1.2 - - (4.9) TOTAL 9.4 36.6 15.5 17.9 19.0 19.0 11.6 NET BENEFIT BEFORE FINANCING

Total 10.2 (17.0) 15.1 18.2 22.5 22.5 29.9 Incremental (27.2) 4.9 8.0 12.3 12.3 19.7 INTERNAL RATE OF RETURN = 28% FINANCING

Long term loan 4/ - 22.3 - - - - - Short term loan - 2.4 1.3 1.2 - - - Less: Debt Service Long term loan - - (2.9) (6.3) (6.3) (6.3) (6.3) Short Term loan - - (2.6) (1.4) (1.3) _ _ Net Financing - 24.7 (4.2) (6.5) (7.6) (6.3) (6.3)

NET BENEFIT AFTER FINANCING

Total 10.2 7.7 6/ 10.9 11.7 14.9 16.2 23.6 Incremental - (2.5) - 0.7 1.5 4.7 6.0 13.4 Cumulative Incremental - (2.5) (1.8) (0.3) 4.4 16.4 29.8 INTERNAL RATE OF RETURN TO FARMER'S EQUITY = 89%

I/ On five acres owned by tubewell owner(s). 2/ On five acres not owned by tubewell owners. Water sold at cost + 50%. 3/ 50% of the increase in operating cost in the following year, assuming a double-cropping system. 4/ 90% of tubewell investment costs at 13% p.a. interest, with 1-year grace period. 5/ 10% salvage value. 6/ Farmers contribution to investment. - 74 - ANNEX 7 Table 9

BANGLADESH

AGRICULTURAL CREDIT PROJECT

Ten Acres Farm Model: Projected Income and Financial Returns

FARM DATA FOR CROPPING PATTERN NO. II - SHALLOW TUBEWELLS Build-up Rate for net incremental income: Command Area : 10 acres owned by tubewell owner(s) Yearl1 : 0% Cropping Intensity 165% without project Year 2 : 50% 210% with project Year 3 : 75%

Investment Cost : Tk 24,800 Tubewell Set Year 4 100%

Tubewell Operating Hours per Year : 468

Project Period . 7 years

------(Takas 1,000)------Without Project With Project 1-7 1 2 3 4 5-6 7

CASH INFLOW

Gross Farm Income 39.2 39.2 55.8 64.2 72.4 72.4 72.4 Off-farm Income (Sale of Water) ------Total 39.2 39.2 55.8 64.2 72.4 72.4 72.4

CASH OUTFLOW

Tubewell Investment Costs - 24.8 - - - - (2.5) 31 Operating Costs 18.8 18.8 24.6 27.6 30.4 30.4 30.4 Tubewell 0 & M l/ - - 1.9 2.9 3.8 3.8 3.8 Incremental Working Capital - - 3.9 2.0 1.9 - - (7.8) Total 18.8 47.5 28.5 32.4 34.2 34.2 23.9

NET BENEFIT BEFORE FINANCING

Total 20.4 (8.3) 27.3 31.8 38.2 38.2 48.5 Incremental (28.7) 6.9 11.4 17.8 17.8 28.1

FINANCING INTERNAL RATE OF RETURN - 40%

Long term loan - 22.3 - - - - - Short term loan - 3.9 2.0 1.9 - - - Less: Debt Service Long term loan - - (2.9) (6.3) (6.3) (6.3) (6.3) Short term loan - - (4.2) (2.1) (2.0) - - Net Financing - 26.2 (5.1) (6.5) (8.3) (6.3) (6.3)

NET BENEFIT AFTER FINANCING

Total 20.4 17.9 4/ 22.2 25.3 29.9 31.9 42.2 Incremental - (2.5) - 1.8 4.9 9.5 11.5 21.8 Cumulative Incremental - (2.5) (0.7) 4.2 13.7 36.7 58.5

INTERNAL RATE OF RETURN TO FARMER'S EQUITY = OVER 150%

1/ 50% of the increase in operating cost in the following year, assuming a double-cropping system. 2/ 90% of tubewell investment costs at 13% p.a. interest, with a 1-year grace period. 3/ 10% salvage value. 4/ Farmers contribution to investment. BANGLADESH

AGRICULTURALCREDIT PROJECT

Financial Rates of Return and Switching Values

Operating Costs Excluding Output Value - Output Investment Tubewells Tubewells 10% All Costs Financial Rates of Return Value Cost 0 & M Costs 0 & M Costs All Costs +10% Estimate -10% -15% +10% +15% +10% +15% +10% 15% +10% 5 Acres Shallow Tubewells Farm 28 21 17 25 24 26 24 27 26 21 14 10 Acres Shallow Tubewells Farm 40 30 25 36 35 35 32 38 38 31 21

Operating Operating Costs Costs Excluding Including Output Investment Tubewells Tubewells Tubewells Switching Value at 12% Value Cost 0 & M Costs 0 & M Costs 0 & M Costs 5 Acres Shallow Tubewells Farm -20% +78% +60% +102% +38% & X 10 Acres Shallow Tubewells Farm -27% +155% +61% +202% +47% 10 Acres Shallow Tubewells-27% +155%Farm +61% +202% +47 m s - 76 -

BANGLADESH ANNEX 8 Table 1 AGRICULTURALCREDIT PROJECT

Prices for EconomicAnalysis - Internationally Traded Commodities,1982-1990 Average

Item Paddy Wheat Jute Urea TSP MP

1. ProjectedAvg. 1982-90World Market Rice Price (US$/ton)1/ 2/ 555 241 495 257 217 109

2. Adjustmentsfor QualityDifferentials 65-70 3/ 90 100 100 100 100 (%) 3. ProjectedPrice Adjustedfor Quality (US$/ton) 361-389 217 495 257 217 109

4. ShippingCosts to/from Chittagong (US$/ton) +37 +59 - +15 4/ +59 +59

5. FOB/CIF ChittagongPrice (US$/ton) 398-426 276 495 272 276 168

6. Handlingand TransportCosts 5/ +50 +44 -63 -25 +25 +25 between the Port and the Wholesale Market/MainGodowns (US$/ton)

7. Market/Ex-GodownPrice (US$/ton) 448-476 320 432 247 301 193

8. Processing,Handling, and Transport -76 -51 -51 +30 +30 +30 Costs 5/ Between the Wholesale Market/Godownand the Farm Gate (US$/ton)

9. Farm Gate Price (US$/ton) 372-400 269 381 277 331 223

10. ProcessingRatio (%) 65 100 85 100 100 100

11. Farm Gate Price Adjusted for Process- 242-260 269 324 277 331 223 ing Losses (US$/ton)

12. (Tk/md)6/ 142-153 158 190 163 195 131

1/ Source:IBRD Price forecastsdated November 1980. The forecastsare in 1980 constantdollars. 2/ PricingBasis: Rice: Thai, milled 5% broken, FOB Bangladesh. Wheat: CanadianNo. 1 WesternRed Spring,ex-store Thunder Bay. Jute Bangladeshwhite D, FOB Chittagong/Chalna. Urea : Bagged,FOB Europe. TSP : FOB US Gulf. MP : FOB Vancouver. 3/ For 25-35%broken. Larger discountfor Boro and Aus crops which are of poorer quality than that Aman crop. 4/ AssumingBangladesh would be an exporterand because of proximityto marketsin South Asia would commanda price advantageover Europeansuppliers. 5/ Costs establishedby a GOB study of these costs.Adjusted by a SCF of 0.75 for the elements havingnon-traded goods and services. 6/ Officialexchange rate of Tk 16 = US$ 1. One ton equals 27.22 mds. BANGLADESH

AGRICULTURAL CREDIT PROJECT

Crop Production Coats per Acre at Economic Prices (Takas)

Aus /Aman B. Aus T. Aus B. Amm xed .Amn T. Aman Boro Wheat Pulses & (local) V (local) (local) (local) (HYV) (jvj Jute Oilseeds Potatoes PH 1/ W 2/ PW 1/ PH 1/ PW 1/ P 3/ W 4/ W 2/ W 2/ PW 1/ W 2/ PW 1/ W 2/ PW I/ W 2/ h 2

Seed 135 g0 130 189 57 so 80 64 122 325 354 29 29 32 32 90 Fertilizer: Urea 122 265 41 122 82 122 122 163 306 245 326 61 82 41 82 245 TSP 98 263 24 98 54 73 73 102 351 195 244 34 24 49 98 146 MP 33 59 - 33 20 33 33 43 62 49 66 16 16 16 33 98 Manure 60 57 - 60 32 38 38 42 212 38 75 30 60 30 45 150

Pesticidis 126 252 126 126 126 126 126 252 252 - 126 - 126 - 126 252 Animal Power 363 429 363 429 330 330 363 396 413 297 396 314 330 198 248 743 Family Labor 179 291 241 367 291 275 291 306 265 179 230 381 332 153 199 714 Hired Labor 75 75 7 75 7 75 7 7 7 7 Others 87 194 143 166 219 209 219 229 255 76 128 178 229 20 - 31 204 SubLotal 1,278 1,965 1,193 1,667 1,286 1,361 1,420 1,672 2,313 1,479 2,016 1,018 1,323 614 969 2,717

Irrigation 0 & M: Shallow Tubewells - 369 - - _ - - 27 592 - 280 - 62 - 316 316 Deep Tubewells ------18 401 - 190 - - - - 214

Cost of Farm Inputs: STW 1,278 2,334 1,193 1,667 1,286 1,361 1,420 1,699 2,965 1,479 2,206 1,018 1,365 614 1,285 3,033 DTW 1,278 - 1,193 1,667 1,286 1,361 1,420 1,690 2,714 1,479 2,206 1,018 - 614 - 2,931

Gross Value of Production (GVP) 5/ 1,988 5,112 3,825 4,906 3,060 3,825 4,590 5,355 6,390 3,160 4,266 3,040 4,180 1,152 1,536 5,400 Net Value of Production: STW 710 2,788 2,632 3,239 1,774 2,464 3,170 3,656 3,485 1,681 1,976 2,022 3,815 538 351 2,367 (NVP) DTW 710 - 2,632 3,239 1,774 2,464 3,170 3,665 3,676 1,681 2,000 2,022 - 538 251 2,469

1/ P W = Present and future without project. 2/ W = Future with project. 3/ P = Present. 4/ H = Future without project. 5/ Yield (Annex 6 Table 2) X economic price (Annex 6 Table 4) - 78 - ANNEX 8 Table 3

BANGLADESH

AGRICULTURALCREDIT PROJECT

Economic Analysis-Cost and Benefit Streams (Takas Millions)

Year 1 2 3 4 5-6 7

- Cropping Pattern No. I Shallow Tubewells (80,000 acres) Gross Benefit 310 515 617 719 719 719 Operating Cost 172 244 292 319 319 230 Investment Cost/(Salvage) 164 - - - - (16) Net Benefit Without Project 188 188 188 188 188 188 Net Incremental Benefit (214) 83 137 212 212 317

Estimated Economic Rate of Return 63%

- Cropping Pattern No. II Shallow Tubewells (190,000 acres) Gross Benefit .972 1,361 1,563 1,762 1,762 1,762 Operating Cost - 485 619 706 752 752 596 Investment Cost/(Salvage) 390 - - - - (39) Net Benefit Without Project 578 578 578 578 578 578 Net Incremental Benefit (481) . 164 279 432 432 627

Estimated Economic Rate of Return = 57%

Total Area 270,000 Acres Net Incremental Benefit (695) 247 416 644 644 944

Estimated Economic Rate of Return = 60%

_/ Includes working capital and administrative costs calculated as 4% of investment costs. - 79 - ANNEX 8 Table 4

BANGLADESH

AGRICULTURAL CREDIT PROJECT

Economic Rates of Return and SwitchingValues

Economic Rates of Return Base Output Value Investment Operating Benefits I/ -10% Costs Costs Delayed +10% +15% +10% +15% By One Year

Shallow Tubewells I 63 51 59 57 55 52 31 Shallow Tubewells II 57 96 53 51 50 48 29

Switching Values at 12%

Shallow Tubewells I -38 +340 +73 Shallow Tubewells II -38 +277 +77

1/ Net incrementaloperating costs reduced by 33% during the additional year without benefits. -80 - ANNEX 9

BANGLADESH

AGRICULTURALCREDIT PROJECT

Related Documents and Data Available in the Project File

A. Reports Relating to the Project

1. "BangladeshBank AgriculturalCredit Study Project," Robert R. Nathan and Sons, August 1979.

2. "Review of Financing Arrangementsfor the IRDP-TCCA-KSSSystem," UNDP Technical Assistance Mission, November 1979.

3. "Performanceof InstitutionalAgencies Providing Agricultural Credit in Bangladesh,"UNDP Technical Assistance Mission, January 1980.

4. "Report of the Bangladesh AgriculturalCredit Project Identification Mission," FAO/World Bank CooperativeProgramme, April 1980.

5. "Report of the Bangladesh Agricultural Credit Project Preparation Mission," FAO/World Bank CooperativeProgramme, August 1980, (Two Volumes).

B. Selected Working Papers

1. "Credit and Banking in Bangladesh".

2. "GroundwaterResources and Development in Bangladesh". - 81 -

BANG LADESH AGRICULTURAL CREDIT PROJECT CHART SHOWING PROPOSEDPROJECT ORGANIZATION AND CREDIT FLOW

GOB…- - ---

SONALIBANK

JANATA BANK BKB | SONALI AGRANI BANK HEAD OFFICE HEAD OFFICE BANK BADC HEAD OFFICES B BSBL Iil I I1' I I 1 DISTRICT REGIONAL BANK ODP | DSTRT DISTRICT |

{ OFFICES OFFICES REGIONAL DISTRICT OFFICE OFFICES CCB OFFICES OFFICES

l l ~~~~~~DISTRICTIi L...... ~COORDINATION ~... COMMITTEES|

BRANCHES BRANCHES OR THANA THANA TCCA BANKS OFFICES

l l L ~~~~~~~~~~~~~~~~~1 KSS /

BORROWERS BORROWERS RS

LINE OF CONTROL CREDIT FLOW - - - LIAISON OR COODINATION - - - - - SERVICES

BADC - BANGLADESH AGRICULTURAL DEVELOPMENT CORPORATION BKB - BANGLADESH KRISHI BANK BSBL - BANGLADESH SAMABAYA BANK LTD. CCB - CENTRAL COOPERATIVE BANK GOB - GOVERNMENT OF BANGLADESH IRDP - INTEGRATED RURAL DEVELOPMENT PROGRAM KSS - KRISHI SAMABAYA SAMITI (VILLAGE COOPERATIVE) TCCA - THANA CENTRAL COOPERATIVE ASSOCIATiON World Bank - 22503 - 82 -

BANGLADESH AGRICULTURALCREDIT PROJECT BANGLADESHBANK PROJECTDEPARTMENT PROPOSEDORGANIZATION CHART

I OFFICERON SPECIAL DUTY

PROJECT DIRECTOR

OFFICERI OFFICER OFFCERER IN IN IN il IN CHARGE . CHARGE , CHARGE '~~~~~~~~~~~~~~~--CHARGET EL S . ~~~~~~~~~~~~~~~~~~~~~I

MONITORING r 1 PLANNING OPERATIONS AND I SPECIAL I WING WING EVALUATION I SCHEMES WING L WING

POLICY CELL SUPERVISION CELL FINANCE AND ACCOU NTS TECHNICALCELL SCPPLIES CELL

TRAINING CELL

REGIONAL OFFICES PROJECT DIVISION SUB UNITS

WorldBank - 22504 - 83 -

BANGLADESH AGRICULTURAL CREDIT PROJECT IMPLEMENTATION SCHEDULE

| 981 1982 1983 1984 1985

1 ?13' 31 2 1 23 3 44 _1 2! 1 42 3

A EARLY PROJECTACTIVITIES 3

Staff Appoientmnts by 8angladesh Bank

Project Director

Supples Off icr_ Traninig Offic-r

Early Eqi,pnent Suppes- IsnueImport Permits

Organize Initial Imports/,Delierirs _- Del very to Proirot Area Project Banking Pan Preparation Early Consultants Re-riutment A Credit Specialist for Bangladesh Bank_

Training Specialist A Early Study Tours

Local Traieieg Plan Formuluti-n BanglsdenhBack P-jtocr Division R-orgunniat-an

Staff Appointre-nts Reorganizat-on B PROJECT IMPLEMENTATION CREDIT COMPONENTS

Shallow Tubewellsi Issue Import Licen-s See Sectioe A Equipment Delicary to Project Aa Sea Section A

Loan Prqcessingi P Consenaction [ Workshops Equipment Loans Processing Equipment Purcnaseand Installation Mechneice Toolsk- Storage

CostrutlnLoan Processang I I - - - I - - I - L.- P,.--g~~ ~ ~~~~-i1 --

Other Diversitifd Lending f I I C PROJECT IMPLEM9ENTATION TECHNICAL ASSISTANCE AND TRAINING

Remaining Coesultants Recruirmant | L A B C ManagEment Specialist far BSBL | I I A B I C Cooper-ti-es Specialist far BSBL A B I C Economist for Bangladesh Bank j A B C I Cooperative Ag,cc-lt,ral Credit Specialist- A B B B B

Remaining Study Tours A B 3 8 m

Local Training Prngrams P-emises Ideerifi-ntion and Renting BKB Pntmises Id-ntificti-n and Renting Other | Staff Appoinemeets BKB Staff App-niments Other Equipment, Fur-itirn, Vehicles BKB Pu.rchan- Equipment, Futin.ure, Vehicles Other Purchases Curriculum Preparation BKB

Curriculum Preparation Other Traiing Co. sen BKB | = - Training Courees Other. -

KEY A = Cons_ruc.io./Eq.ipment Tender Procedura, Consultants S-let-on, Training Arrangements = Constrsction Period, Equipment Delivery Period, Consultants Mohilizat on Period, Training Course Perind C C onsultants' Service Period WorId Bank -22505

a°0 IBRD15591R a8 89° 890 BANGLADESH90 MARCH 1981

-270 AGRICULTURALCREDIT PROJECT 270 TUBEWELLSUITABILITY AND BANKING SYSTEM

- AREA SUITABLE FOR SHALLOW TUBEWELLS I N D IA AREA UNSUITABLE FOR SHALLOW TUBEWELLS AREA WITH LIMITED POTENTIAL FOR SHALLOW TUBEWELLS BANKING SYSTEM(Numberof Bank Branchesby District) ft. BANGLADESH KRISHI BANK BKB AGA AGRANI BANK /. \>,.SONALI BANK SON THANA CENTRAL COOPERATIVE ASSOCIATION JANATA BANK JN KSS KRISHI SAMABAYA SAMITY

(ts \ ~ =. =DISTRICTBOUNDARIES INTERNATIONAL BOUNDARIES

F KILOMETERS 1 ~~~~~~~ ~~~10--202 3~~~ -3D~~~~~~~~~~~MILES

NOTE: Boundariesbetween areaswith varing suitability ), "~~~~~ for shallow tubewells are indicative only. 026° 3560 << ' 0 f 8t> *--; Sc_;v<,l;i (~~~~~~~~~~~~~~~~~~~~~~~26

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World~~~~~~~~~~~~ ~Ban sEB staff -) , j,-> 2xlseyfrt,.rs INDIAS ,

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Thismap has beenprepared 24°th part ofdo te by nor the mply on w ,- ...- : .: .', DuCCa the convenience of the readersof the report to erhichit is attached.? TheWorlddenominations Bank' sntsaffiiiatses.ay used and the for, \..? , boundariesshown on this map KUSHTI A ID ' . AN'. do not m-ply,on thepartf the INDIA World Bank andits affiliates, any jugeton the legal status of o any territoryor any endorsement KUSHTIA or acceptancesf such boundaries. KUSHTIA

BEn 50 , ____

IBRD1559CR 88° 890 90° MARCH 19811

BANGLADESH 27° AGRICULTURALCREDIT PROJECT LAND USE

CROPPINGPATTERN I (Mainly BroadcastA,nan, Fallow) CROPPINGPATTERN 11I Mainly Transplant Aman, Fallow) I N D IA . CROPPING PATTERN III (Mainly Transplant Aman, Aus) OTHERS

Al j MAJOR ROADS / ---- s--RAILWAYS THANA BOUNDARIES

r\ > , t _ _ - DISTRICT BOUNDARIES ,, s, - _._ INTERNATIONAL BOUNDARIES

nchagar f - Th~ ~~~~~~~~KLMILERS~ ~ KILOMETERS 10 20 30 40 50 MILES 0 10 20 30 .f .. /' d \ t Jto J nsgamari

260 260

Pirgan U Nilphamari . - Pirgani - ~~~~ ~~~~~~~~~~~~~~~~~~~Sta Sidpur1

f~~~~~~~hlai I '-.Xi N D I.A RANGPURAL UR I N D I A I - > GaibanykA i

250 ,S) -,,,,, (-r-i~~~~~~~~~~~~~~~~JMLU, .> ! l'~~~~~~~~~~aypqrfiat AM PUR' 2 -

A U Y SN

-250~~~~~~~~~~~~~~~~~~~~~~~~(ag4 90 0

ITI XS . H X Ck. W<''\t,S

…G;;5> 4 - S a ,,2 PROJ \A>>ay= AREA r- SANGAIL < Oo1sA

Thi, -p has beenprepared bythe ,t\, .AB&A:\.-SAe\E World Bank s stff eclus;vely for H \-.-6K#T_AC NI th eport ntihoWhihit s attached.Rit sul iNDIA|'\2

24 Wonrld BannkYandits affiliates, anY ), T I~~~~~~~~~~- l2 K6tAA<9t judgment on the legal Status of 3 ta \ _ KUSHTIA k I N l KJ § 12 ) t D-C any r BB° territoroy orny endorsement 4 8~~~~~~~~~~~~~~~~~~~~192 KU_J8^1 :''f2;g( pSH BI30~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.Eso',N( - U ~>XByorna o,Roccrsa cof sLchboundanes l>\.Wi/ttmKA; ft T t t