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A Comparative Statistical Analysis on Agricultural Banking System in Bangladesh.

Md. Rashidul Alam Mahumud
Senior Lecturer
School of Business, Department of Statistics, Asian University of Bangladesh

Most. Nargis Pervin
Senior Lecturer
School of Business, Department of Marketing , Asian University of Bangladesh

Dr. Md. Ripter Hossian
Professor
Department of Statistics, University of Rajshahi, Rajshahi-6205, Bangladesh

Abstract/ Executive Summary:

Bangladesh is a land of agriculture from the very beginning. Agriculture has a major impact on the economic development of the country. To ensure sustainable agricultural development, agricultural banks are providing adequate financial support for the smooth running of these sectors. The study is on diagnostic and exploratory in nature and it depends on secondary data. The researchers have analyzed proportional perfection and enlargement of both agricultural banks in Bangladesh. They have examined the dissimilar services and conveniences provided for the overall perfection of these sectors. The finding shows steady growth in terms of branches, employees, deposits, loans & advances, investments, deposit interest rate, loan interest rate and net profit of both agricultural banks (Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank) during the period 2004-2010. Simple regression analysis, paired t-test and coefficient of determination (R2 ) were used to test the secular trend, comparing the functional significance performance and how well fit the regression equation by using the real data point for the different actions of agricultural banks of Bangladesh. Finally, outcomes are interpreted in this framework and suggestion that comparative management of agricultural banks in Bangladesh has significantly enhanced which has been commenced by the Government of Bangladesh.

Keywords: Agriculture, Deposits, Loan & Advance, Investment, Deposits Interest Rate, Loan Interest Rate, Regression Analysis

Location: In Bangladesh

Start Date: 00-00-2004

End Date: 00-00-2010

Program Area: Knowledge Management

Non-commodity: Banking

Objectives:

Objectives of the Study: 1. To test the secular trend in different components of the Agricultural bank in Bangladesh. 2. To find out the comparative performance between Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB). 3. To develop better understanding about the principal activities of Agricultural banks in Bangladesh.

Methodology:

The present study has been carried out to comparative analysis on the agricultural banking system in Bangladesh. The selected banks are: Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB). The present study is diagnostic and exploratory in nature and makes use of secondary data. The relevant data and information were collected from annual reports of these banks, Bangladesh Bank, Securities and Exchange Commission and websites of relevant agricultural banks in Bangladesh. The study is confined only to the specific areas like number of branches, district coverage, deposits mobilized, credits and investments made by the agricultural bank for the seven years period starting from 2004 to the year 2010. For comparing the agricultural bank’s performance, these data has been analyzed through the various statistical measures like growth percentage, simple regression analysis, paired t-test have been accomplished through Microsoft Office Excel, Minitab and SPSS Software. Bangladesh Krishi Bank (BKB): Bangladesh Krishi Bank (BKB) has been established under the Bangladesh Krishi Bank order 1973 (President's Order No 27 of 1973). BKB is a banking company under the Banking Company Act-1991. Its Head Office is located at Krishi Bank Bhaban, 83-85 Motijheel Commercial Area, Dhaka-1000, Bangladesh. The primary objective of BKB is to provide credit facilities to the farmers for the development of agriculture and entrepreneurs engaged in development of agro-based and cottage industries. BKB is guided in accordance with the policies and principles of the Government of the Peoples Republic of Bangladesh. It has an authorized capital of Tk.15, 000 million (Taka fifteen thousand million) only and paid up capital of Tk.9, 000 million (Taka nine thousand million) only which is fully paid by the government. The Bank started commercial functioning since 1977 to generate more loan able fund from the idle rural and urban savings and invest them for the betterment of our economy. Rajshahi Krishi Unnayan Bank (RAKUB) was established by the President's Ordinance No. 58 of 1986 with the aim of providing institutional agricultural credit for optimum utilization of agricultural potentials of Rajshahi Division. Taking over all the 253 branches and offices along with assets and liabilities of the Bangladesh Krishi Bank within Rajshahi division, the bank started functioning on 15 March 1987. As the largest development partner in the northwest region Rajshahi Krishi Unnayan Bank aims at overall development of the farmers and all the sectors and sub-sectors of agriculture in this region. Besides catering to agricultural credit, financing agri-business and agro based industries, activities related to socioeconomic development and poverty alleviation programs, the bank performs most commercial banking functions. At the time of establishment authorized capital of the bank was Tk. 1500.00 million(taka one thousand five hundred million) which was raised do Tk. 1800.00 million (taka one thousand eight hundred million) during the financial year 2005-2006. During fiscal 2007- 2010 the bank under look a plan, approved by the ministry of finance, to raise authorized capital of the bank in the four consecutive years and lift it to Tk. 7500.00 million(taka seven thousand five hundred million) only. Accordingly authorized capital stood at Tk. 2200.00 million(taka two thousand two hundred million). At present Paid-up capital amounts to Tk 2200.00 million and reserve amounted to Tk. 208.40 million.

Source of Information: BANGLAVISION International research Journal, 9(1), 119-138, August 2012; ISSN: 2079-567X

Article Link (Online Journal):

Funding Source:

Budget:

Total Budget (Tk.) :

Achievement/Findings:

The agricultural banks have started in Bangladesh in the year 1973. After commencement, the agricultural banks are playing a vital role in the economic development of the country. It is reflected from the analysis that almost every year both the banks (BKB & RAKUB) are opening new branches. BKB had the highest number of branches in the year 2010, which were 962. However, both banks should open more new branches for the overall development of the agricultural sector in Bangladesh. The agricultural banks have created employment opportunities for more than fifteen thousand people in Bangladesh. However, from the analysis, the researchers have found that both the banks lost their employees during the year 2005 to 2008 but they have regained their manpower at the end of 2010. From the simple regression analysis the researchers have observed that R2 of employees for both the banks are less than 66.9% even worse, BKB has negative regression coefficient, which means their employee turnover will continue in the future. These indicate that the prospect of employees in agricultural banks is very poor. The banks should take remedial measures to reduce their employee turnover. From the study it is reflected that RAKUB had experienced a negative growth for deposits in the year 2005, but in a subsequent year they have improved their deposit base. The deposit base of BKB also improved every year. The regression coefficient value of deposits is positive for both the banks. The coefficient of determination R 2 is also more than 0.90. It indicates that the banks will be able to attract more deposit in the future years. It is a positive sign that both banks have increased the deposit interest rate during the period 2005 to 2010. From the simple regression analysis it is expected that the banks will continue to increase the deposit interest rate in the future as well. It will encourage small savers to save more and allocate their savings in the overall improvement of the country. The researchers have found that BKB has reduced their total investment gradually throughout the years. on the other hand RAKUB has disbursed the slidely increase amount of total investment in the year 2010. From the simple regression analysis the researchers have found that the regression coefficient values for deposit interest rate of both banks are positive which indicates that the banks will increase the amount of deposit interest rate in future. The loan interest rate also shows a declining pattern which will encourage small and medium entrepreneurs to take loans from RAKUB but BKB should focus more on this issue regarding to increase the loan interest rate even more. Both banks should concentrate more on loan interest rate. It is reflected from the analysis that there is no consistent pattern for agricultural loan interest rate. However, the scenario is relatively better for industrial loan disbursement and recovery. It is recommended that both the banks should disburse loan for easy condition and should set a target for loan recovery in both the sectors. It is always better if the banks can recover loan at a consistent pattern in every year. Otherwise the banks’ profitability can be hampered. The researchers are quite optimistic that if the given suggestions of this study are implemented then the agricultural banks may be able to overcome its present problems and may contribute in the rapid development of the agricultural sectors of Bangladesh. The findings may be of considerable use to banking institutions and policy makers in developing countries and to academic researchers in the area of banking comparative concert evaluation.

Knowledge Management: Journal