Rural Economy , Production Cycle & Micro Credit Analysis of Vilaage Dhonokandi

CHAPTER-
RURAL ECONOMY, PRODUCTION CYCLE &MICRO-CREDIT ANALYSIS

PREPARED BY- Priyanka Barua (# 0821071) INTRODUCTION

Economy and “commerce changes the genius and fate of the nation”. It is the key to understand any country, region or locality’s over all scenario. In the modern world money is second god and economy gives us the power to understand and utilize the power of it. And that is why it is very important to understand the socio economic scenario of a country to know it properly.
In case of Bangladesh, it is a country with population of about 162 millions with 75% of the population living still in rural areas. So we could say that to understand Bangladesh’ socio economy we have to understand the rural economy first.
The main source of our national income comes from agriculture and agro based business which is the main livelihood of the most of people of agrarian Bangladesh. So agriculture is the base of our rural and then overall economy. That is why we have studied the production method and cycle of different kinds of crops in this chapter.
Since Dr. Unus developed the concept of micro credit, that has vastly improved and utilized by this rural people to improve their life standard. And that is why we have tried to analyze the facts of micro credit as well.

OVERVIEW ON THE VILLAGE

If I had to choose one word to describe the village Dhonokandi economically, it has to be Diverse. The variety and ups and downs in the life standards and financial system has given us a lot of opportunity to think and evaluate.
Through the course “LFE (Live in Field Experience)” we got the chance to experience of rural life by seeing & learning. On this great journey, we were assigned with the village named Dhonokandi from district Sylhet. It is under 4no Khadim Nagar Union, covering about 1 km square of area. Population is not more than 1000. And the main occupation of the villagers is Farming. And some of the used to be villagers now live in abroad. That is why besides agriculture, another source of income is foreign money therefore Remittance of the villager. Some people have shifted their occupation from traditional to modern demand work over the years; like mechanic, transport worker, tailor etc. The idea of micro credit has taken place in Dhonokandi as well. And for various purpose people take micro credit from different NGO’s. Rural people are so occupied in taking micro credit that for some of them it is hard to live without. So NGO’s like FIVDB or ASA or Grameen Bank plays a momentous role in rural life.

OBJECTIVE:

 To identify the overall socio economy of the village Dhonokandi.
 To identify the wealth ranking of the village on the basis of their income level & living standard.
 To identify their income source.
 To find out the relation between life standard wealth ranking.
 To focus on the life of agriculture through production cycle.
 To recognize the benefit a farmer gets or not from farming through “cost profit analysis”.
 To distinguish different aspects of rural economy.
 To identify the functions of different NGOs.
 To analyze the micro credit’s contribution.

LIMITATION:

 As the data were collected on the basis of a sample respondent, it might not be true for the whole village.
 Limitations on time to collect data.
 Communication gap between the villager and us.
 Villagers’ ignorance of their own condition.
 Difference between the rural measurements and standard measurements.

WEALTH RANKING ANALYSIS

In Dhonokandi village on their base of economy we have got to see a number of variety in their income level and source; therefore the wealth based class. The classes are,

1. Rich Class
The class with the highest income and purchasing power. This class people were at a medium level in our village. And one of the major sources of their income is remittance.
2. Upper Middle Class
The class lies between middle and rich class. Most of the villagers fall in this class. The main source of this class was agro labor or farming.
3. Middle Class
This class is bellow the income level of upper middle class and just
4. Poor Class
This class people generally represent the poor class with very low purchasing power. Their income source is mainly transport work.
5. Extremely Poor Class
This class is way below poverty line. They barely live hand to mouth. They are deprived of education and many other basic needs. Pie Chart Showing the Percentage of Villagers in Each Class
Differences in income level have affected their surroundings. E.g. house structure valuable belongings entertainment facilities and many more. So let’s get familiar with their income and expense level first.

Total Family Income and Expenses per Annum

Class Approximate Income level Approximate Expense
Rich Above 336,000.00 Above 280,000.00
Upper middle 240,000.00-300,000.00 200,000.00-250,000.00
Middle 144,000.00-180,000.00 120,000.00-150,000.00
Poor 50,000.00-120,000.00 Not More Than 100,000.00
Extremely Poor Bellow 48,000.00 Not More Than 45,000.00
The income expense chart shows that there is a huge difference between rich and extremely poor. Which caused the house and many other belonging entertainment media to be vastly different from one class to another?

INCOME SOURCES

Mainly people of village Dhonokandi were farmers. They used to farm for their living. But as the time went, their occupation evolved and changed.

FARMING: Most people had their own lands previously. But gradually the class farmer divided into two groups,
 Land Owner
 Agro Laborer / Barga Farmer
People who generally have lands do not live in the village. So the farmers of the village are mainly peasant farmers. Very few farmers cultivate their own land.

POULTRY & CATTLE REARING: All the villagers of Dhonokandi have poultry birds for household consumption as well as side income. Mainly the home maker of every house is in charge of the poultry birds

TRANSPORT: Now a day to meet the demand some people have changed their occupation from farming to transport. The transport workers includes  Cng Taxi Driver
 Rickshaw Puller

MECHANIC: A newly emerged occupation is mechanic. As the power of electricity has reached the village the need for to fix electric machine has increased, so has the need of mechanic.

SMALL BUSINESS/ TEA STALL: A good source of income of middle class people is small business or tea stall.

REMMITANCE: An important source of income of rich people is remittance. It is the foreign money their relatives send abroad.

TAILOR/ GARMENT WORKER: Most poor class people’s income is from this sector. The income from this source is very low.
Picture: Graph of Income Source of different class

FINDINGS:
 Major income source is farming.
 Remittance is also a source of income of Upper Middle % rich class.
 The availability of vast fertile land helped the major occupation to be farming.
 Small business and transport worker is a new edition and source of income of lower class.
 People are shifting to different sources of income than farming.

HOUSE TYPE

Rich: The houses of rich people are mainly brick build.

Upper Middle: The houses of this class people are generally semi pakka.

Middle: Middle class people also has house with tin shed.

Poor: The poor class people cannot afford a house brick built. That is why they build their house with tin shed and wall made out of earth or bamboo.

Extreme Poor this class cannot even spend money on tin shed. So ultimately they build their house of natural resources. E.g. Bamboo,
Earth, Straw etc. VALUABLE BELONGINGS & LIFE STYLE
Because of the difference in income there is a difference in the things they posses and their life style. Because of the income level there is a difference in the education they receive, and thus the point of view towards life. Though the availability of loan in easy conditions has changed the situation a bit. A table explaining this situation is stated below.
LIFE STYLE:
Parameter Rich Class Upper Middle Class Middle Class Poor class Extreme poor class
Food Habit  Rice
 Meat
 Fish
 Vegetable  Rice
 Meat/ fish
 Vegetable  Rice
 Fish
 Vegetable  Rice
 Vegetable  Rice
 Vegetable
Education level Up to  Higher Education  HSC  SSC  Class viii  Class V
Female Education  SSC  SSC  Class V  Class V  Religious School
Sanitation  Septic Tank  Pakka Ring Slab  Ring Slab  Hanging Toilet  Hanging toilet
Water Source  Piped Water
 Tube Well  Tube Well  Tube Well
 Pond  Shared Tube well
 Pond  Shared Tube well
 Pond
Cooking Place In The Kitchen In The Kitchen In The Kitchen In Living Room Out Side

Washing Toiletries  Detergent Powder  Washing Soap  Local Soap  Local Soap  Ash
 Local Soap
Saving Vs Borrowing  More Saving
 More Borrowing  More Saving
 Less Borrowing  Less Saving
 More Borrowing  Borrowing  No Saving
 No Borrowing
VALUABLE BELONGING:

Parameter Rich class Upper Middle class Middle class Poor class Extreme Poor class
Electronics  TV
 VCD
 Fan  TV
 Fan  TV
 Radio  Radio None
Live stock  Cow
 Ox
 Duck
 Hen  Cow
 Duck
 Sheep  Duck
 Sheep  Duck
 Hen  Duck
 Hen
Communications (Mobile) 2 1 1 None None
Land Above 30 Keyar Not more than 30 Keyar No Cultivable Land No Cultivable Land No Cultivable Land
House Hold Items  Bed
 Sofa
 Almirah
 Chair
 Table  Bed
 Chair
 Alna
 Table  Bed
 Table  Bed  Bed
Store Room capacity Above 80 Maunds 40- 70 Maunds Open Space Open Space Open Space

Comment: From the charts above showing the lifestyle and valuable belongings separates rich and poor. Rich has more money and can afford more valuable things that make their life more comfortable and improves their life standard. So it is safe to say that not only the differences in their belongings but also in the life standards of villagers validate the wealth ranking class of them.

Findings:
 Female Education is now encouraged.
 People are more conscious about food habits.
 Rich people are leaning forward to the need of higher education.
 About all class people has some live stock for personal consumption as well as side income.
 Poor and extreme poor class people are reluctant to the idea of borrowing.

SEASONAL MAPPING:
In our village about 50% people are farmers. So to understand their economy we have to know the mapping of the crops they grow. The villagers usually grow crop twice a year. For a better understanding we have made a seasonal mapping of two kinds of crops they usually grow and one kind of vegetable. These are;
 Guarchora
 Boro 28/29
 Egg Plant

We made the seasonal mapping on the basis of Bengali month. It is because in village farmers do their farming and daily chores based on Bengali month. In growing any crop or vegetable there are some chores that are mandatory. These are,

 Preparing seed bed
 Plouwing
 Sowing
 Fertilizing
 Rainfall
 Artificial Irrigating
 Nursing
 Harvesting SEASONAL MAPPING

Table Showing Seasonal Mapping of “Guarchora”, “Boro”, “Eggplant” Guarchora: When we visited the village it was the month “Agrahayon” locally called “Agunmaiya”. And the crop major portion of farmers were harvesting was “Guarchora”. A crop generally takes four months to fully matured and to be harvested. So it is sown in Bhadra or Ashwin. But before that the seedbed is prepared. As this crop is sown in the rainy season, this crop does not need to be irrigated artificially. Rain does the work of it. And a little nursing like, weeding using pesticide gets the work done properly.

Boro28/29: The seed bed for this crop is prepared when “Guarchora” is harvested during Agrahayon. And from “Poush” to “Magh” it is sown. This time of the year is the driest in our country. So there is a need of artificial irrigation. Some of the farmers uses electric pump but others do it manually by irrigating through jars of filled pond water.

Egg Plant: About all the farmers who grow crops grow some vegetables as well. So we randomly picked to make the seasonal mapping of Eggplant of all the vegetables. This particular vegetable can be sown and harvested any time of the year. But it is best sown at Agrahayon. The seed bed is prepared the month before the sowing. At Chaitra this vegetable is harvested.

SOME IMPORTANT ASPECTS OF AGRICULTURE

SOIL TYPE: One of the most important aspects of agriculture is the soil. The fertility and the type of soil determine the type of crop and amount of harvest. In Dhonokandi the soil type was sandy loam mostly. But the soil is fertile and vast to grow any kind of crop.
PERIOD TO HIRE WAGE RATE
SOWING PERIOD Tk 80- Tk 100
Harvesting Period Tk 120- Tk 150

RAINFALL / IRRIGATION: In Dhonokandi villagers are blessed with perfect rain from Ashar to Bhadra. But rest of the year farmers has to depend on artificial irrigation for farming. Artificial irrigation is done in two ways  Labor Irrigator.
 Electronic Pump.

LABOR: Generally farmers do the work themselves in Dhonokandi. But at times they hire laborer. Usually the farmers of Dhonokandi hire labor two times for farming.

SEED: There is a Krishi Somiti in the village and farmer gets free seeds from there. And they also buy it in cheap rate from GO’s.

FERTILIZER: The amount of harvest largely depends on fertilizer. Traditionally only cow dung was enough for cultivation. But by the time went the fertility of the land decreased and need of output of crop increased. This led to other strong artificial fertilizers like, TSP, UREA etc is. Though this fertilizers has negative impact on the soil. That’s why they are converting to some other organic fertilizer and as well measures to make land fertile.

PLOWING: Before sowing seeds the land needs to be ploughed. By tradition cows are used for this purpose. But in Dhonokandi ox cart is famous for this job. This is why most villagers have ox. Tractor is quiet expensive for the agro laborer of the village. But when massive production is concerned they hire tractor

PESTICIDE: Usually farmers of Dhonokandi do not use pesticides. But some times to protect crops they have to use pesticide. Foradon, Kuraden is the popular ones as pesticides.

STORAGE FACILITY: The storage facility of the farmers of Dhonokandi is not good quality. A very few farmer has their own granary like Macha or Chala. Most farmers just store their crops in open place. And some of them store crops in hired store room or at land owners place.

LAND OWNED: Some of the villagers have their own land to grow crops. But most land owner lives outside the village. Some of them live outside the country too

BORGA AGREEMENT: About 90% of the farmers grow crop on others land, based on an agreement. This agreement is called Barga. And the farmer is called barga farmer. These barga farmers have to give a portion of their produce to the land owner for letting them to use the land.

Having seen the key factors of farming, we now may see the costing of a farmer on farming and their produce. This brings to our next discussion.
COST-BENEFIT ANALYSIS
In the table below we have shown the cost benefit analysis of a crop named BORO28/29.
Revenue from Boro 28/29 (1 Acre)
Name Amount
Crop 45 Maunds
Selling price Tk. 600.00
Revenue Tk. 27000.00
Cost of Boro28/29
Type Tk.
Seeds 590.00
Hiring Tractor 1,500.00
Hiring Pump 1,000.00
Labor Cost 15,000.00
Harvesting Cost 3,000.00
Total Cost 21,090.00
Profit 5,910.00

From the table above we can easily realize that the profit is too much less than the cost. This means the farmers are not getting the ultimate livelihood through farming only. They are shifting their earning sources to different directions. In the chart we can see that before the liberation war people were more oriented to do farming and a few were involved with fishing. But it started decreasing after liberation war. But after 1991 till now it has decreased most drastically more than 20% of the villagers have shifted their earning source to others as transportation worker, mechanic or service. The major reason for this drastic shift is low percentage of profit from farming. And others are,

 Not having an owned land.
 Less fertility of the land.
 The new increasingly growing middle men (Bepari, Paikar).
 Other work takes less physical strength
 Educated villagers want to do jobs outside the village rather than farming.

MICRO CREDIT:
Micro means small and credit means loan so micro credit is a term that represents small loan. It is mainly for those entrepreneurs who lives below or just at the poverty line and cannot afford to take loan from commercial banks as those seek for mortgage. So it can be said that it is a tool that helps poor people eradicate their poverty. It has been proven its worth by making a lot of poor but willing people self employed. It is a very early idea but ever since Dr. Md. Iunus had it modified it has been popular. Many countries like USA itself have used it as a tool to improve the situation of people in some region.
In our country to it has been established and helped many people improve their lives. Dhonokandi village was not an exceptional. In this village the micro credit is popular as well. Different NGO’s have been working with the villagers of Dhonokandi for many years.

PICTURES OF DIFFERENT NGO ACTIVITIES ACTIVITIES OF NGO’S
Women Empowerment: Some NGO’s mainly provide loans to the female customers. Thus it creates the opportunity for the women of the society to be empowered.
Children Education: These NGO’s makes people conscious of the necessity of education. Thus they encourage villagers to be literate.
Proper Sanitation: NGO’s hold many seminars on the need of proper sanitation.
Family Planning: They also hold seminar providing knowledge of family Planning
Housing loan: They provide housing loans that helps villagers improve their life standard.
SME Loan: This small enterprise loan provided by NGO’s creates the possibility of self employment.
Micro Credit: The best product served by NGO’s is micro credit which has changed the life and the view about life of rural people.

These are just a few major activities of bunch done by NGO’s.

RESPONDENT: BORROWER vs. NON BORROWER:
While surveying we found out that in our village Dhonokandi different NGO’s have been working since 1995. People gradually understood the idea of micro credit, and started taking loan. People have several reasons of taking loan. But some people are still afraid of the interest and even the terms. As most villagers are not well educated, fears like this is not so surprising.
This chart shows the percentage of villagers take or has taken micro credit and those who have not. And the ratio of borrower is increasing but in a steady manner.

MICRO CREDIT PROVIDERS: The provider of micro credit is now several NGO’s. But the scenario was not always the same. Before NGO’s villagers used to take loans from the powerful and wealthy people in the village usually called “Mohajon”. But their high interest rates and fraudulent acts their popularity decreased and people started borrowing from NGO’s. These NGO’s are  GRAMEEN BANK
 FIVDB
 ASA
 VARD
 BRAC

But in our survey at Dhonokandi, we found that villagers of Dhonokandi take micro credit from mainly FIVDB and then ASA.

In this chart the ratio of people taking loan from FIVDB & ASA is shown. The person who takes micro credit mainly takes it from FIVDB. And a few does it from ASA.

NOMINAL vs. ACTUAL INTEREST RATE:

When it comes to take micro credit, the main concern is about the interest rate. The NGO’s gives loan on easy terms and small installments. But they charge interests on the loan. We have calculated the actual and nominal interest rate of the NGO mainly provides micro credit facility in Dhonokandi.

Calculation of Nominal Interest Rate (FIVDB)
Loan Amount = Tk. 10,000.00
Installment Payment= Tk. 250.00 per week
Installment Weeks= 45 weeks
No Weeks in A Year= 52 weeks Administration Expense = Tk. 600.00
Total Amount Payable (i) = (250 * 45) + 600= Tk. 11,850.00
Nominal Interest Rate= (Total Amount – Loan Amount) / Loan Amount
= (11,850 – 10,000) / 10,000
= 0.185

Calculation of Actual Interest Rate:
EIR (Effective Interest Rate) = (1 + i/r)n – 1
= (1 + 0.185/45)52 – 1
= 23.78%

Time Value of Money:
Future Value = Present Value (1 + i/r)n – 1
= 10,000(1 + 0.185/45)52 – 1
= Tk. 12,378.00
The interest FIVDB claims to charge and the interest it actually charges is a lot different. The time value of money shows us that at that actual interest rate the Tk. 10,000 generates Tk. 2,378. The actual rate is about 0.05or 5% high.
In the graph below FIVDB & ASA’s nominal interest rate is compared against its actual.

REASONS OF TAKING MICRO CREDIT:
The reasons are many; but according to the sample we surveyed there are some particular reason for taking micro credit. These are,

ADVANTAGES & DISADVANTAGES OF MICRO CREDIT

MAJOR FINDINGS
There are some things we saw special and significant of this village. These are the major findings stated below.
 Decrease of farm land.
 Dhonokandi is a village where most villagers are Borga Farmer
 Farm lands are mostly owned by Rich.
 A major source of rich class income is Remittance
 Agro laborers mainly go for micro credit.
 Misuse of loan amount.
 Since liberation there has been a steady progress in the life standard of middle class.
 Since liberation poor people has become poorer.

CONCLUSSION:
As I said at the beginning rural economy is the heart of Bangladesh. After our survey we believe, we have seen a very glimpse of its beauty. But still it’s a sad story that the most legged behind economy of Bangladesh is its rural economy. Dhonokandi village has the same scenario as any other villages of Bangladesh. It has same “Illiterate population”, “Deprived farmers” and the same old “Mohajon”s in a new packet named NGO’s. the backbone of our nation’s economy; the farmers are most denied. So I would like to suggest some ideas that might improve the life of this naive rural peple.
First of all to improve the overall condition of rural people education is a must. Then secondly to improve their economic condition, I would like to suggest a traditional idea of “Somobay Somiti”. Cause this will increase the level of income by decreasing cost. I would not suggest these farmers to be trained. Cause this step is has already been taken and working too.
And for the NGO’s I would like remind, they are the organizations to improve the rural life not to suck on them. So they should have transparency on their work and word.

Not just for Dhonokandi, the problems and solutions concerns any village in any part of the country. So we can hope, if tries are made for the betterment of rural life it would benefit the whole country.