Reforming an Agricultural Development Bank

This working paper describes the reform attempts of the management of the Agricultural Development Bank of Nepal (ADBN). The paper describes the two main reform packages of the Bank in 1997 and 2001 and derives lessons from these experiences.

The paper provides information about:

• The history of ADBN, its operations and the challenges it faced with donors;
• ADBN’s reform path, analyzing externally pushed reform efforts and the need for indigenous reform measures;
• The First Reform Package detailing its objectives and activities in:
  • Monthly payment of interest,
  • Rural savings mobilization,
  • Restructuring existing loan portfolios,
  • The process of reform implementation.
• The Second Reform Package providing details of its objectives and components, the ‘Responsibility Center Concept’, accounting and transfer pricing policies and post reform changes.

It lists lessons that the Bank learnt from these reforms in terms of:

• The need for change in the staff work culture;
• The involvement of senior staff;
• The credentials of the CEO and the senior management;
• Government support;
• Changing people’s mindsets about profits.

The paper concludes by devising a reform agenda for the future that would include:

• Tightening of reform policies;
• Use of money-lenders;
• Acceleration of the pace of transformation;
• Creation of a favorable environment for competition among branches;
• Use of technical staff, etc.