Evaluation of financial policy : credit allocation in Bangladesh

The Bangladesh government has used a variety of policies to influence the allocation of credit to specific borrower groups like poor farmers, uses such as housing, and sectors such as agriculture. These policies have also been used to reduce allocation for certain uses such as inventory holding, i.e. speculative purposes. The policies used have included interest controls credit guarantees, refinancing, and margin requirements. This paper attempts a systematic analysis of all the policies used by the Bangladesh government in the light of the explicit or implicit objectives of the government. The effect of each of the policies used, alone or in combination, is analyzed with a view to evaluating their usefulness and efficiency. The analysis then provides the basis for suggested policy changes in Bangladesh, as well as lessons for financial policy makers in other countries.