Case study-2 : Flood affected potato loan recovery.

Background : Rupali Bank disbursed Tk, 4.8 million in short term crop loans at 14% interest rate to 360 potato farmers in Nilphamari for winter cultivation. The loan was given for a period of 06 months on condition that the loan will be repaid after harvesting crop.

Problem :

-Sudden overflows of Testa River flooded almost 40% of potato fields.
-Only 50% of farmers made full repayment by due date.
-Some farmers demanded interest waiver due to "natural disaster".
-Middleman offered low farmgate prices, reducing farmers income.

Recovery actions taken ;

-Bank conducted field assessment and categorized farmers into fully and partially affected.
-Loan for 45% of affected farmers were rescheduled with a 3-month grace period.
-Price negotiation meetings arranged between farmers and traders.
-A mobile recovery team was formed to follow up weekly.

Outcome :

-Within four months, Tk. 3-6 million was recovered
-Farmers appreciated flexible restructuring and continued borrowing next season.

Task to do :

(a) Identify internal and external factors affecting loan recovery.
(b) Evaluate effectiveness of bank actions.
(c) Suggest additional strategies to improve recovery:
(d) Calculate recovery rate and amount of outstanding loan including interest.