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INTERVIEW

Reaching out to the poor

New BB boss shares his thoughts with The Daily Star

Sajjadur Rahman
It is not very common to hear of a central bank governor promising to visit the poorest of the poor, extending support where no bankor NGO has made their mark.
Before taking the reins of Bangladesh Bank as its chief, Dr Atiur Rahman had visited farmers in charlands and seen their lives up close.
Rahman promises to hold on to what he did earlier.
“I will keep visiting these remote places and help these marginal people to come into the mainstream economy," Rahman says. He has wide experience in dealing with those on the margins of society.
Rahman shared his plans with The Daily Star in an interview at his nongovernmental Unnayan Shamunnay office where he had worked before taking over as the Bangladesh Bank governor.
"I will be a people's banker, not a conventional one. "
Rahman took office as the central bank governor yesterday for a four-year term, replacing Dr Salehuddin Ahmed.
He vows to pressurise commercial banks to expand their operations to rural areas to help the country decentralise economic activities and for job creation.
“I will compel private and foreign banks to expand their services to low-income entrepreneurs at rural growth-centres," says Rahman.
He questions why all the economic pressures are Dhakacentric.
The country's 30 private commercial banks (PCBs) have over 70 percent of their branches in urban areas. Nine foreign commercial banks (FCBs) have no presence in rural areas. Also, the state-owned banks have gradually been limiting their operations to non-urban areas.
The new governor is asking banks to rethink their strategies in view of the operations of some NGOs in the rural areas.
"If banks go for rural banking, it will create more jobs," says Rahman.
SMEs are the heart of the economy, generating more employment than any other sector, he says. "Hassle-free and collateral-free loans have to be extended to the sectors that carry potential," he says.
“Banks will be offered extra incentives to encourage them to lend in greater proportions to the SMEs,” says the new regulator of the country's financial sector. Banks can also be tagged with the NGOs, to better lend to the rural regions, he suggests.
The new governor also focuses on areas, such as budget preparation for the next year, challenges of the ongoing economic crisis, public expenditure, domestic demand creation, revenue collection, lending rate and dealing with the International Monetary Fund. Controlling inflation will be another area that needs major work.
He says the upcoming budget's main challenge would be to tackle fallout from the global financial crisis.
"The budget will focus more on how to combat the crisis and its impact on different sectors." savs Rahman.
He says the budget must focus on increasing internal demand. A reduction in demand may affect the economy negatively, he says.
The annual development outlay must be implemented in a way that helps keep domestic demand up, Rahman emphasises.
The budget has to address the constraints on infrastructure, like the power crisis, with urgency, he adds.
Rahman also feels the need for better coordination
between the monetary and fiscal measures. He says revenue collection would also be a challenge in the next budget.
"Public expenditure must be reduced."
Rahman supports his predecessor's policy to cut the lending rate, and promises to broaden the reduced rate to other areas. Recently, BB capped the lending rate at 13 percent
To deal with the International Monetary Fund (IMF), he says, the government and the central bank could hire experts from outside for negotiations with the multilateral lending agency.
He also believes IMF would increase its assistance to the poor countries thisyear, amid the global economic crisis.
Rahman believes the Bangladesh economy enjoys inherent strengths, like the widespread activities of several NGOs and other grassroots initiatives.
"This is the reason Bangladesh will achieve around 6 percent growth this year, despite a slump in neighbouring and global economies."
Rahman, who has more experience in the micro-sector than macro, says he will not face any problems managing the country's macro-economy.
"I have chaired the operations of a state-run bank for three and a half years and I was in the board of another for one year and a half."
sajjad@thedailystar.net