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)