Bank Keshavarzi (Agricultural Bank of Iran)

Bank Keshavarzi (Agricultural Bank) at the outset began its operation in 1933 as a financial institution supporting the agriculture sector. Its financial resources had been provided by government, mostly through capital. Thus, before 1980s, the bank was less concerned over supply of its financial resources and its basic performance was the distribution of the resources supplied by government, acting indeed as a credit fund for agriculture sector up to that time.

Restriction of the financial resources of the bank, on one hand, and more demands for credit facilities in agriculture sector, on the other, as well as lack of profitability and the loss-incurring of the bank during early 1990s, resulted in the emergence of the need for a change in strategy of the bank and to decide over a new approach for it. This approach put an emphasis on self-reliance through resource mobilization and absorbing public savings by the bank itself and entrance into the universal banking activities rather than receiving the financial contributions from the government and their disbursement in agriculture sector.

The bank has been adopting new strategies to meet the ever-increasing demand for finances in agriculture sector to mobilize resources. The bank has broadened its range of activities by introducing new services to its depositors in many town and villages and to gear up to the new challenges, it now offers more than hundred various banking services to customers in its branches throughout the country. Bank Keshavarzi (BK) is evidently the only major body in charge of the financial affairs of Iran’s agriculture sector.

Owing to its competent management and human resources, the bank now has over 1858 branches and thirty million customers around the country, acquiring a unique status both in Iran and across the globe. Bank Keshavarzi has won “the bank of the year (2006) award,” writes The Banker for Fourth successive years.

Rural poverty is regarded a complicated phenomenon which is the function of many factors such as social, economic, and political structures in countries. Thus, poverty alleviation is mainly seen as a multi-dimension challenge to be realized through investment in creating productive assets, technology and knowledge exchange, training purposes, and offering financial and non-financial services. Rural micro finance is also a part of the challenge, which includes increasing access of rural poor communities to financial resources, meeting the needs of rural households and businesses, and creating more employment facilities.

Micro finance has been flourished as one of the vital tools of development and poverty alleviation in developing countries for the last two decades. However, it must be taken into consideration that some were successful and stable with a vast range of coverage whereas some were encouraging but with limited coverage and others were unstable and unsuccessful. “Linkage Banking” was one of these successful pilot programs, undertaken and innovated by member countries of Asia-Pacific Rural and Agricultural Credit Associations (APRACA), being implemented with promising and optimistic results in nine Asian countries.

In September 2002, “Rural Micro Finance Support Project” was initiated as a pilot exercise aimed at localizing the practice in four Iranian provinces. Following phase Ι of the project, completed in June 2004, phase ?Ι is being executed at the moment. The overall objectives of the project are as follows: 1) Increasing the target groups’ access to financial services through linkage banking; 2) Job-creation for rural women and young adults and increasing earnings of low-income rural households.

The project is financially supported by International Fund of Agricultural Development (IFAD) and Bank Keshavarzi, hereinafter BK. In this regard, IFAD’s financial resources are provided to offer consultancy and technical assistance, social mobilization, and capacity building in the bank, civil organizations and target groups, whereas BK extends its financial services in forms of micro credit, and savings as well as livestock and agricultural products insurance, if needed.

The executive agency of the project is “The International Enterprise for Development of Rural Micro Finance Services (DRMFS-International)”, in cooperation with BK and local non-governmental organizations, which designs and implements the project in target provinces, i.e. East Azerbaijan, West Azerbaijan, Ardebil and Kurdistan in which target groups consisting of rural women, young adults and low-income individuals are populated.

Identification of target groups and increasing more awareness about the socio-economic conditions dominating over their environment, were the first steps taken in implementing the project. Simultaneously, a socio-economic survey was conducted using the random sampling method in 12 different villages located in underdeveloped regions of these four provinces, including 713 sample rural households. The most significant objective of the survey was estimate the accessibility of rural population to formal and informal credit resources. The survey data have clearly and evidently revealed that: Out of 713 sample households, 36.2% have received the required financial facilities from formal credit sources, 2.5% from Qard-al-Hassanah Fund (Interest-free loans) and Relief Committee, as well as 19.7% from informal sources, especially relatives and intimate members of their families. The survey also represented that BK had the highest share in disbursing financial credits, amounting to more than 65%.