Rural Institutional Finance in Bangladesh and Nepal: Review and Agenda for Reforms

Abstract

This study covers Bangladesh and Nepal, two low-income DMCs with heavy dependence on the rural economy but inadequate development of a financial system for the rural sector. The two country studies highlight problems endemic to many low-income DMCs and also identify a number of difficulties that seem to be country-specific. For the Bank, it is necessary to understand country-specific constraints to be able to assist effectively in the financial development of individual DMCs. This study looks at recent works and efforts in rural finance and endeavors to present the main ingredients of a general framework for reforming and strengthening rural financial systems. Specifically, the study aims to: (i) examine existing institutional Financial structure and markets; (ii) evaluate socioeconomic and other constraints hindering the effectiveness of the existing system; (iii) indicate the policy reforms and external intervention necessary to establish adequate rural financial systems that will serve by-passed areas and groups; and fix ) recommend ways in which a multilateral Financial institution such as the Bank can help.