MICROCAPITAL STORY: Bangladesh Central Bank Push for Agricultural Finance Triggers Citibank-led Loan Syndication: BURO Bangladesh to Raise $14.5m to Support Agriculture Microfinance Program

BURO Bangladesh, a microfinance institution in Bangladesh, announced that it will raise Tk 100 crore (USD 14.52 million) through syndicated loans. The financing, arranged by Citibank NA, will be used to expand BURO’s microcredit program, with 30 percent going towards their agricultural loan portfolio. According to The Daily Star, the expansion follows on a push by the central bank of Bangladesh to encourage agricultural credit programs.

BURO Bangladesh, formerly BURO Tangail, was established in 1990 with an aim to “provide high quality flexible financial services to low-income people.” They currently have 393 branches across Bangladesh, and serve approximately 1.2 million clients. As reported on MIX Market, the microfinance information clearinghouse, BURO Bangladesh has a gross loan portfolio of USD 45.4 million, and almost 500,000 active borrowers. In order to better serve their clients, BURO offers a diverse product portfolio including six types of loans, three savings products, a micro-insurance scheme and remittance services.

Bangladesh Bank, the central bank of Bangladesh, recently issued a circular urging private banks, either independently or in collaboration with NGOs, to offer increased agricultural credit. In a country where 48 percent of employment is in agriculture, the Bangladesh government has guaranteed institutional and policy support for the sector. The agricultural credit program also hopes to spur domestic food production in the face of the current food crisis, rising demand for food, use of crops to produce biofuel, and protectionist policies by food-exporting countries. In its Annual Report, the Bangladesh Bank discussed targets for disbursement through the Agricultural and Rural Finance Program. This emphasis on agricultural credit is partly behind the expansion of BURO’s agriculture loan program, which includes cattle rearing, fishery, fertilizer and insecticides.

Mosharaff Houssain, finance director of BURO Bangladesh, has confirmed the five-year loan agreement, with an interest rate of 15 percent for the first six months and linked to government treasuries thereafter. Financiers in the syndication include Citibank NA, Sonali Bank, Agrani Bank, Pubali Bank, Mutual Trust Bank, Southeast Bank, United Commercial Bank, National Bank, Dhaka Bank and Eastern Bank.

The additional funding will allow BURO Bangladesh, which was named a Forbes Top 50 Microfinance Institution in 2007, to serve an additional three lakh (300,000) clients by year-end.

By Jaclyn Berfond

Additional Resources:

The Daily Star: BURO to raise Tk 100cr in syndicated loans by Sarwar A Chowdhury and Sohel Parvez

The MIX Market: BURO Bangladesh (BURO Bangladesh, formerly BURO Tangail)

BURO Bangladesh: Homepage

Bangladesh Bank: Annual Report 2007-2008, Chapter 7

MicroCapital.org Story, January 2008: Forbes’ Special Feature on Private Investment in Microfinance Includes Top 50 Microfinance Institutions

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