Loan Pricing Definition
Loan Pricing
8:14:00 AM
Leading Operation and Risk Management
22 comments
Monday, January 30, 2017
Bank of America
SWIFT / BIC Code and Routing Number of Bank of America
SWIFT code, BIC code of national and international branches of Bank of America have been placed here. Such as - USA, UK, Netherlands, Canada, Australia, Germany, Italy, Ireland, France, Japan, Thailand, Korea, India, Singapore and all other national branches etc.
Saturday, January 28, 2017
Working Capital Loan
7:47:00 AM
Leading Operation and Risk Management
15 comments
Working Capital Definition
Working capital signifies money required for day-to-day operations of an organization. No business can run without the provision of adequate working capital.
It has two types:
1) Gross working capital that refers to as working capital means the total current assets;
2) Net working capital that the differences between current assets and current liabilities.
Definition of Working Capital Loan
Working Capital Definition
Working capital signifies money required for day-to-day operations of an organization. No business can run without the provision of adequate working capital. Definition of Working Capital Loan
A working capital loan is a loan used by an organization to cover day-to-day operational expenses. For example, a company is unable to generate the revenue to meet expenses incurred by day-to-day operations. In such case, company may apply for a working capital loan. A working capital loan covers only expenses incurred by existing capital, human resources, etc.
Friday, January 27, 2017
Credit Planning and Term Loan.
11:01:00 PM
Leading Operation and Risk Management
27 comments
Credit Planning and Term Loan's Substance
Credit planning is to set out procedures for defining and measuring the credit-risk exposure within the Group and to assess the risk of losses associated with credit extended to customers, financial investments and counter party risks with respect to derivative instruments. Term loan refers to asset based loan payable in a fixed number of equal installments over the term of the loan, usually for 1 to 5 years.
Credit Planning
A credit planning is to set out procedures for defining and measuring the credit-risk exposure within the Group and to assess the risk of losses associated with credit extended to customers, financial investments and counter party risks with respect to derivative instruments. The main aspects of a credit planning are-
1) the terms and conditions on credit,
2) customer qualification criteria,
3) procedure for making collections, and
4) steps to be taken in case of customer delinquency.
Project
9:16:00 AM
Leading Operation and Risk Management
11 comments
Project's General Information
A project is temporary in that it has a defined beginning and end in time, and therefore defined scope and resources that are ways of organizing resource. It is a group of individuals who are assembled to perform different tasks on a common set of objectives for a defined period of time. A project is refers to that a temporary group of activity designed to produce a unique product, service or a result. A project has defined by following aspects:
1) It is defined a beginning-end schedule and approach;
2) Uses the resources to allocated works;
3) Achieves the specific goals within an organized approach;
4) Usually involves a team of workforce.
Tuesday, January 24, 2017
Banking Terms for Agriculture Financing (short notes)
Short Notes for Agriculture Financing.
A written, chronological summary of all deeds, mortgages, foreclosures and other transactions affecting the title to a tract of land. Also called abstract of title.
A common provision of a mortgage or note providing the lender with the right to demand that the entire outstanding balance be immediately due and payable in the event of default.
Monday, January 23, 2017
Important of micro credit
Importance of Micro-Credit in Agricultural Lending and Development
1. Uncertainty of output and prices.
2. Poverty of the small farmers who are more than 50% in Pakistan and they lack the securities in order to get loans.
3. The friends and relatives provide the meager amounts as credits.
4. The recovery of loan from agriculture sector is a difficult job.
5. Majority of farmers are illiterate, rigid and orthodox and they do not know any thing about banking practice. As micro-credit is life blood of agriculture production.
Therefore, the financial needs of farmers can not be under-estimated and they will have to be provided more funds, despite all of the problems attached with agriculture credit. Therefore, to provide more credit and finance to farmers in future we will have to depend upon the experiences of West as well the experience of Bangladesh in the form of Greeman Bank. Thus the future of credit and farming in agriculture will be bright if farmers are given the loans;
Therefore, the financial needs of farmers can not be under-estimated and they will have to be provided more funds, despite all of the problems attached with agriculture credit. Therefore, to provide more credit and finance to farmers in future we will have to depend upon the experiences of West as well the experience of Bangladesh in the form of Greeman Bank. Thus the future of credit and farming in agriculture will be bright if farmers are given the loans;
1. In terms of agriculture inputs along with consultancy services -
The case of supervised credit, This can better be done through NGOs working at village level, They will follow less tedious loaning procedure and they will have complete supervision over the funds used and output produced.
2. The loans given by NGOs and micro-financing institutions like Greeman bank will advance smaller amounts. The recovery of such advancing is also easy when the bankers are having a gross root link with the villagers.
3. The Commercial Banks and Agricultural Development Bank should come forward to rescue the dying farmers of Pakistan. They must relax the loaning conditions; loans be advanced on personal security, instead of physical security; the greater contact be maintained between the banking staff and the poor rural borrowers; and State Bank of Pakistan should provide cheaper loan to commercial banks so that they could lend the funds to farmers at cheaper rates.
Supervised Agriculture Credit
Importance of Micro-Credit in Agricultural Lending and Development
1. Uncertainty of output and prices.
2. Poverty of the small farmers who are more than 50% in Pakistan and they lack the securities in order to get loans.
3. The friends and relatives provide the meager amounts as credits.
4. The recovery of loan from agriculture sector is a difficult job.
5. Majority of farmers are illiterate, rigid and orthodox and they do not know any thing about banking practice. As micro-credit is life blood of agriculture production.
Therefore, the financial needs of farmers can not be under-estimated and they will have to be provided more funds, despite all of the problems attached with agriculture credit. Therefore, to provide more credit and finance to farmers in future we will have to depend upon the experiences of West as well the experience of Bangladesh in the form of Greeman Bank. Thus the future of credit and farming in agriculture will be bright if farmers are given the loans;
Therefore, the financial needs of farmers can not be under-estimated and they will have to be provided more funds, despite all of the problems attached with agriculture credit. Therefore, to provide more credit and finance to farmers in future we will have to depend upon the experiences of West as well the experience of Bangladesh in the form of Greeman Bank. Thus the future of credit and farming in agriculture will be bright if farmers are given the loans;
1. In terms of agriculture inputs along with consultancy services -
The case of supervised credit, This can better be done through NGOs working at village level, They will follow less tedious loaning procedure and they will have complete supervision over the funds used and output produced.
2. The loans given by NGOs and micro-financing institutions like Greeman bank will advance smaller amounts. The recovery of such advancing is also easy when the bankers are having a gross root link with the villagers.
3. The Commercial Banks and Agricultural Development Bank should come forward to rescue the dying farmers of Pakistan. They must relax the loaning conditions; loans be advanced on personal security, instead of physical security; the greater contact be maintained between the banking staff and the poor rural borrowers; and State Bank of Pakistan should provide cheaper loan to commercial banks so that they could lend the funds to farmers at cheaper rates.
Agricultural credit and policy
Problems of Agriculture Credit and Agriculture Credit Policy.
There is need to discuss the issues which are obstructing the supply of credit to farming sector-
1. Uncertainty element in agriculture:
In Pakistan the agriculture cannot be industry. More than 50% of the cultivable land is consisted of uneconomical holdings. The farmers are illiterate, they follow the orthodox techniques of production and fail to make investment in farm due to poverty. They cannot store their produce. The farmer is poor because he is poor. Above all, our agriculture sector is furnished with uncertainty. We have floods as well as droughts. The rains are untimely. The pests badly affects the crops. The financial position of the farmers remains weak. Not to talk of ADBP and Commercial Banks even the Cooperatives are not prepared to give loans to farmers. Thus because of poor financial status, more affects of natural uncertainty in agriculture, the commercial banks an other financial institutions are not prepared to lend to farmers. They think that the cost of advancing loans to farmers are more than their revenues. The relation which existed between banks and industry and commerce is missing in case of banks and farmers. The farmer who is poor and illiterate can not frequently visit the banks as the businessmen do. The supervised credit scheme could not be successful in the presence of our socio-economics set-up.
2. Lack of Securities:
If we sum the area of small farmers and medium sized farmers their share is 92% of total cultivable area. In such area most of the farms are commonly owned. While borrowing the farmers have to pledge their lands.
But in our rural society land is like the mother of the farmer and he is not prepared to be separated from it. He will prefer not to get the loan rather mortgaging the land. If he is prepared to pledge the land, it will be difficult to ascertain its value as we do not have efficient market for the sale and purchase of lands. It is too difficult to eject the farmers from his land, if he fails to pay the debt. The farmers lacking the pass books will not be able to draw upon the banks.
They have to go registers and pages for the sake of registration of this lands where lot of formalities and malpractices exist. In such situation, they prefer to move to “Informal Sector” for borrowings. The cattle do not serve as good security. They can not be transported easily and their health standard will be affected. The unharvested crops can also serve as security. But the problem of estimation of crop will rise there. If the debtor does not pay the borrowed money he will lose his position. The personal security loans are also taken away by the big landlords as no body is prepared to give security of small farmers.
3. Non-Institutional Credit:
So many farmers in Pakistan do not have any way out except to go for non-institutional credit. But the friends and relatives are limited source, they fail to supply enough funds. They could not provide loans for consumption and limited production purposes. They hardly provide developmental loans. Then, the farmers move to landlords and commission agents to get the loans. The landlords provide loans to marginal extent. Hence the commission agents help the farmers, but they provide the loans on the promise that the borrowers will sell the crops to them. They give low price for the produce and exploit the farmers. Hence, the non-institutional loans are also advanced in lesser amount.
4. Improper Use of Agriculture Credits:
So many experts are of view that agriculture credit will be least beneficial if they fail to increase the agriculture output, increase the cultivable area and improve the lot of farmers. But in our country, the productive use of agriculture loans is limited. Most of loans taken by the farmers are for social needs and consumption. The farmers are prepared to sell their seeds, bulls and plows to perform their horse and cattle show fairs, marriages and funerals ceremonies. Thus agriculture loans are fail to alter the lot of small farmers. The burden of debt on them goes on to increase and they may leave this would even without making payment of such loans. Against small loans, the big loans taken away by the landlords are diverting towards power, prestige, litigation and politics. Thus the agriculture loans are not bringing changes in our agriculture sector. In certain cases, the agriculture loans are becoming responsible for increasing inequalities in rural sector.
5. Complicated Procedure and Strict Conditions:
The farmers have to face very strict conditions and complicated procedures while getting the loans. They have to give their pass-books where all the information regarding land are entered. According to Rural Credit Survey (1985), the farmers with land of 60 acres and above had the pass-books while 1% of the farmers with less than 2 acres were having pass-books. Thus, the farmers who were not having pass-books how they could get the loans. Again, the official formalities, the behaviors of surveyors and strict conditions of Bank obstruct the small farmers to get loans. Again, the weak financial position and higher interest rate also hamper loaning on the part of farmers.
6. Recovery of Credit:
The process of recovery of loans is very much low. As told earlier that due to financial position the small farmers fail to pay back the loans. The big landlords make their credits to be written-off. The farmers should have repaid their loans after harvesting. But this does not happen. The Bank Officers and employees of cooperatives are found wandering in the village to find the debtor so that they could recover the loan. Often the arrest warrants are issued. But the process of loan recovery limited, as the farmers hardly care for repayment of loans and arrest warrants.
Measures to Remove Problems of Agriculture Credits.
Following measures are adopted to remove the problems of agricultural credit.
1. The uncertainly elements in agriculture be minimized. The farmers must be hardworking so that they could utilize the farms efficiently. As a result, the agriculture production increases and agriculture sector will become profitable in this way, the flow of agriculture credit will go up.
2. The provision of agriculture loans be linked with productive capacity and efficiency of land, rather securities.
3. The farmers be provided with complete package of agriculture inputs instead of just loans as the case of supervised credit. Therefore, this scheme should be effectively implemented.
4. The better advisory services be provided regarding agriculture marketing. In this way, the farmers could be able to get fair prices of their produce and easily repay loans.
5. A revolution in agriculture sector be brought about so that people could pay more attention on developmental works, rather social traditions.
Agricultural Financing
Definition and meaning
A field of work in which people aim to improve the access of the agriculture industry, including farmers and all related enterprises, to efficient, sustainable financial services. Agricultural finance can be dealt at both micro level and macro level. Macro finance deals with different sources of raising funds for agriculture as a whole in the economy. It is also concerned with the lending procedure, rules, regulations, monitoring and controlling of different agricultural credit institutions. Hence macro-finance is related to financing of agriculture at aggregate level.
Micro-finance refers to financial management of the individual farm business units. And it is concerned with the study as to how the individual farmer considers various sources of credit, quantum of credit to be borrowed from each source and how he allocates the same among the alternative uses with in the farm. It is also concerned with the future use of funds.
Therefore, macro-finance deals with the aspects relating to total credit needs of the agricultural sector, the terms and conditions under which the credit is available and the method of use of total credit for the development of agriculture, while micro-finance refers to the financial management of individual farm business.
Nature and Scope
Agricultural finance can be dealt at both micro level and macro level. Macro-finance deals with different sources of raising funds for agriculture as a whole in the economy. It is also concerned with the lending procedure, rules, regulations, monitoring and controlling of different agricultural credit institutions. Hence macro-finance is related to financing of agriculture at aggregate level.
Micro-finance refers to financial management of the individual farm business units. And it is concerned with the study as to how the individual farmer considers various sources of credit, quantum of credit to be borrowed from each source and how he allocates the same among the alternative uses with in the farm. It is also concerned with the future use of funds. Therefore, macro-finance deals with the aspects relating to total credit needs of the agricultural sector, the terms and conditions under which the credit is available and the method of use of total credit for the development of agriculture, while micro-finance refers to the financial management of individual farm business.
Significance of Agricultural Finance
1) Agriculture finance assumes vital and significant importance in the agro–socioeconomic development of the country both at macro and micro level.
2) It is playing a catalytic role in strengthening the farm business and augmenting the productivity of scarce resources. When newly developed potential seeds are combined with purchased inputs like fertilizers & plant protection chemicals in appropriate / requisite proportions will result in higher productivity.
3) Use of new technological inputs purchased through farm finance helps to increase the agricultural productivity.
4) Accretion to in farm assets and farm supporting infrastructure provided by large scale financial investment activities results in increased farm income levels leading to increased standard of living of rural masses.
5) Farm finance can also reduce the regional economic imbalances and is equally good at reducing the inter–farm asset and wealth variations.
6) Farm finance is like a lever with both forward and backward linkages to the economic development at micro and macro level.
7) As agriculture is still traditional and subsistence in nature, agricultural finance is needed to create the supporting infrastructure for adoption of new technology.
8) Massive investment is needed to carry out major and minor irrigation projects, rural electrification, installation of fertilizer and pesticide plants, execution of agricultural promotional programmes and poverty alleviation programmes in the country.
Need for Agricultural Credit.
Credit is required in every type of business and agriculture is not exception of it. The need for agriculture credit becomes more important when it moves from traditional agriculture to modern agriculture. The agriculture sector at present is best with number of handicaps. The land holding is very small. The population is growing at a fast rate.
Agricultural labour is often underemployed. Production suffers from weather risks. The capacity of farmers to save and invest is very low. The agricultural productivity is low due to low use of inputs. The farmers therefore, need credit to increase productivity and efficiency in agriculture. This need is increasing over the years with the rise in use of fertilizers, mechanization and rise in prices. Briefly the need for agricultural credit can be summed up as follows -
1. Purchase of new inputs:
The farmers need finance for the purchase of new inputs which include seeds, fertilizers, pesticides, irrigation water etc. If the seed of high yielding varieties and other modern inputs are made available to the farmers they can increase productivity not only of land but also of labour.
2. Purchase of implements:
Credit is required by the farmers for the purchase of tractors, threshers, harvesters, water pumping sets etc. The use of appropriate machinery in land will increase production by growing more than one crop on the same piece of land at the same time.
3. Better management of risk:
Credit enables the farmers to better manage the risks of uncertainties of price, weather etc. They can borrow money during raining days and pay back the loans during peak years of crops.
4. Permanent improvement in land:
Credit also helps the farmers to make permanent improvements in land like sinking of wells, land reclamation, horticulture, rotation of crops etc.
5. Better marketing of crops:
If timely credit is available to the farmers, they will not sell the produce immediately after the harvest is over. At that time the prices of agricultural goods are low in the market. Credit enables the farmers to withhold the agricultural surplus an sell in the market when prices are high.
6. Facing crises:
The credit is required by the farmers to face crisis. The crisis can be caused by failure of crop, drought of floods.
7. Balanced development:
Agricultural sector generally remains neglected compared to industrial sector in the country. For balanced development, it is essential that credit should be provided at concessional rates to the agriculture sector so that it should also expand and help in “take off” process of the country.
Types of Agricultural Credit
Agriculture requires the following three types of credit -
1. Short-Term Credit:
The short term credit ranges upto one year. The farmers need short term credit for meeting the working capital arrangements of agriculture. For instance, they need short term credit for the purchase of seeds, fertilizers, pesticides, bullocks and other casual expenses. Sometimes short term credits are also raised for paying rents, revenue and also meeting the financial requirements of the family. The short term credit is repaid after marketing the produce of next crop.
2. Medium Term Credit:
The medium term loan extends from 1 to 5 years. The farmers require medium term credit for the purchase of cattle, purchase of implements, improvements in water courses etc. The loan is obtained on the security of movable and implements.
3. Long Term Credit:
The duration of long term credit exceeds five years. The farmers need long term credit for making improvements of permanent nature in land such as sinking of tubewells, reclamation of land, building, purchase of machinery and implements etc.
Sources of Agricultural Credit.
Credit in the farm sector is available from following two sources -
1. Non-Institutional Sources/ Informal Sources:
The major non-institutional sources of farm credit are money lenders, friends, relatives, shopkeepers and commission agents. Before 1947, the money lenders mostly non-Muslims were the main suppliers of loans to the farmers. After partition, however their importance has decreased to a great extent and the short term credit needs of the farmers are met from commission agents, friends and relatives which supply roughly 50% of total rural borrowing. The traders and commission agents advance loans to the farmers for short period. These loans are provided mostly for productive purposes before the maturity of crops. The commission agents force the farmers to sell the produce to them which generally is purchased at low rates. The lenders of the informal sources (friends, relatives etc) have certain advantages over the formal credit sources. The informal lenders usually know the borrowers personally. They require little security for advancing loans. The loan are given for consumption as well as production purposes. The lenders are approachable at all times. They are also lenient in rescheduling loans. However, informal lenders are also accused of charging higher rates of interest. They extract monopoly profits from the borrowers.
2. Institutional Sources / Formal Sources:
The major institutional sources of agricultural credit are Zarai Taraqiate Bank Limited (ZTBL) formally known as Agricultural Development Bank of Pakistan, State Banks, Commercial Banks, Cooperative credit and Taccavi Loans.
A. Zarai Taraqiate Bank Limited (ZTBL) formally known as Agricultural Development Bank of Pakistan (ADBP):
The ZTBL was established in 1961 through merger of Development Finance Corporation and Agricultural Bank of Pakistan. The ZTBL is an important source for supply of credit to agricultural sector in Pakistan. The ZTBL provides short, medium and long term credits for farm and off farm activities. The bank have five windows of investment.
(1). Development loans
(2) Production loans
(3) Agri-business loans
(4) Cottage industry loans and
(5) Off farm income to farmers generating activities loans.
B. Commercial Banks:
Commercial Banks were introduced into the field of agricultural credit under the Banking Reform Act of 1972. The Banks, since then, are providing loans to the farmers for meeting their short and medium term requirements. The loans are advanced to the farmers against the security of land, crops, fixed assets and even on personal security. Commercial Banks disburse agricultural credits for the purchase of inputs, cattle, tractors, dairy farming, installation of tubewells etc. Banks provide loans under the Supervise Credit Scheme and outside the Supervise Credit Scheme.
C. Cooperatives:
The cooperatives are oldest institutional sources of farm credit in Pakistan. The performance of cooperatives in the spread and utilization of credit to the small farmers is not satisfactory. The loans are mostly utilized by big farmers who have got their pocket societies registered with their cooperative department.
D. Taccavi Loans:
Taccavi loans are handled by the Provincial Revenue Department. Necessary funds are allocated for different areas each year in the provincial budgets. The Taccavi loans are primarily given to the farmers for meeting emergencies such as flood, earthquake, famine etc. The farmers take these advances in the spirit of gift or relief given in the calamity and are not serious in repaying them. Now this source is now occupying insignificant position in the disbursement of overall credit to the farmers. Agricultural loans are being made available to the farmers at low mark up.