BRAC, one of the largest NGOs in Bangladesh, introduced in 2009 the ‘Tenant Farmers Development Project’ (called Borga Chashi Unnayan Prakalpa). The project was initiated with Tk. 5,000 million (USD 70 million) as a revolving loan fund from the Bangladesh Bank (Central Bank of Bangladesh) with an interest rate of 5 per cent per month (the rate at which commercial banks can borrow funding from the Central Bank). Funding was initially given for three years with a target of reaching 300,000 farmers for credit provision within this period. Subsequently, in 2012, Bangladesh Bank approved extension of the project for another three years.
The main objective of BCUP program was to reduce the dependence of tenant farmers on high-cost informal markets for financing their working capital needs. Tenant farmers do not typically have access to formal financial institutions. By reducing credit constraints, the BCUP program aimed at improving farm productivity and livelihoods of rural small-scale farm households of Bangladesh significantly.
Borga Chashi Unnayan Prakalpa (BCUP) provides a customized credit services to farmers who cultivate land owned by themselves (owner farms) and by others either fully or partially (pure tenant, tenant-owner etc.). Loans are provided at subsided interest rate - a flat rate of 10 per cent per year. The effective rate of interest is 15 to 20 per cent on declining balance depending on the mode of repayment of the principal and interest due. The credit limit is $62 to $375 (i.e., taka 5,000-30,000 ); duration is 6-10 months; grace period is 1 month and the instalment is monthly. BCUP was targeted to reach all 484 Upazilas (sub-districts) of Bangladesh in successive phases. By September 2012, the program reached 212 Upazilas.
Households are selected for a loan disbursement based on a few stages of verification. The first stage entails initial selection of members. Members are selected by matching each household against the BCUP eligibility criteria and orienting the farmers with the BCUP program and its terms and conditions. The second stage is the formation of the Village Organization (VO). After initial verification of information, if members agree to the terms and conditions of the BCUP, a small group of five farmers are formed informally. Stage three entails collection of member information. In the final fourth stage, the members list is finalized through verification by Branch Manager on the eligibility of the selected members.
After this selection process, new members get a formal admission and attend an orientation meeting. An important feature of the BCUP is the formation of Village Organization (VO) and its use as a platform for service delivery. In the VO, members are grouped in teams of five members, and four to eight teams consisting of 20 to 40 members forming the village level informal tenant farmer association. The VO meets once every month on a fixed day and time which is attended by the BCUP Program Organizer and an agricultural technician. Apart from the discussion of loan proposal and collection of repayment of the instalment dues and the deposit of savings, farmers can get agricultural information and advice from the Agriculture Development Officer.
The BCUP program relies on clustered randomized control trial (RCT) design. The program first identified 40 potential branch offices for program scale-up in 2012. Branches were randomized into a treatment group (20 branches), which was being offered credit services. For each treatment and control branch, from the universe of all villages within an 8-kilometer radius branch catchment area six villages were selected at random for each of the two groups. The resultant sample was 240 villages which comprise the study sample for this project.
In each of the 240 villages, we conducted a census survey spanning 61,322 eligible households. Using household census information and based on the program eligibility criteria, 7,563 households were identified as eligible for the BCUP program -- 4,228 and 3,335 made up the treatment and control areas, respectively.