Transforming Land Bank into a Microfinance Development Institution
The paper discusses the need and methodology to transform the Land Bank into a microfinance development institution. The Bank was conceived as an institution that would efficiently provide financial services to small farmers and small and medium enterprises (SMEs). Over the years however, it has played a dual role: a development bank and a commercial bank, with the latter forming a much larger portfolio than the former, thereby defeating the very purpose for which it was conceived.
With the advent of banking reforms and the government's consideration of creation of a Grameen Bank style institution for microfinance, the author suggests:
- Change focus: With so many private and international banks now available to service the ordinary needs of the people, Land bank has outlived its commercial role and should focus only on development banking function;
- Evolve suitable products and services: Credit programs should focus on both farm and non-farm activities as they are intricately linked;
- Increase Private investment: Government should explore ways of increasing private participation in Land Bank, thereby expanding the ownership and accountability of the bank.
The author suggests that if the above measures are put in place, the government need not invest in another financial institution, and the Land bank can be effectively developed into a viable microfinance development institution.
