Agrobank

AgroBank is a major Corrailite banking and financial institution, headquartered in Centreburg. It is the third-largest bank in Corraile in terms of assets held, and by far the largest bank in the country in terms of its customer base, which exceeded 5.9 million in 2011. It is also the third-largest financial institution in the country by market capitalisation and is listed on both the Centreburg Stock Exchange and the Corraile Industrial & Commerce Index.

Founded in 1974 by the Corrailite government as part of the Rural Revitalisation Programme, the company, then known as the Public Savings Bank of Corraile (PSBC), was formed primarily as a means to an end, providing low-interest microfinancing loans to small, independent farmers in the country, such that they were able to afford the tools required for mechanised farming.

Privatised in 1992, the company rapidly adapted from its position as a social welfare organisation to a for-profit organisation, aggressively expanding into other sectors, such as real estate investment trusts and agricultural co-operatives. Today, a significant proportion of the company's customer base (71%) are still residents in rural areas, where the bank has the largest presence compared to all other banks.

"The farmer's bank"
The Rural Revitalisation Programme (RRP), introduced by the government in 1970 just after independence, was meant to improve the socioeconomic prospects of small, independent farmers in Corraile. A key feature that was expected to significantly increase agricultural productivity and profitability was the mechanisation of farmland. Up until as late as 1973, an estimated 79% of all farmers lacked modern farming equipment, such as harvesters and tractors. This was seen to be holding back the productive potential of the agricultural sector in Corraile, especially important then since agricultural exports accounted for almost 39% of Corrailite GDP then.

In 1972, the government introduced Agricultural Co-operative schemes, which included hefty subsidies on farming equipment, reducing the prices of such equipment by up to 40% of its original price. Despite the massive absorption of initial costs by the government, the equipment was still beyond the reach of many ordinary Corrailite farmers, most of which were family-run, low-income farmsteads. They could not afford the relatively exorbitant prices of the machinery (sometimes up to 30% of each family's life savings) and thus the pickup rate of the subsidised farming tools was below expectation.



It soon became apparent that a lack of capital on the part of the farmers was slowing the progress of the RRP. To combat this problem, in 1974, the government announced the formation of the PSBC as a provider of low-interest credit to farmers, such that they were able to afford the equipment that was necessary for the modernisation of their farms. By providing such low-interest, low-risk loans, it was hoped that farmers would be convinced over the benefits of modernisation, and the response rate to these loans was high. Many farmers took the opportunity to access government-secured, long-term, low-interest loans to help pay for farm improvements. As a result, many farmers were able to afford their first tractors and combine harvesters, leading to strong growth in the total output of farms over the next decade, as farmers were able to use their increased income to afford further machinery, such as grain silos and modern irrigation technologies (also subsidised by the state).

By 1976, the PSBC held a total of CR$10.6 million dollars worth of credit, and had also diversified into other sectors of rural banking. The bank, being government-supported, was also the primary bank of choice for most farmers, who chose the place their life's savings in the bank because of the security the bank accorded over their deposits. By 1978, the bank had a total of over CR$22.8 million deposited in the bank's vaults, and continues to maintain a strong consumer banking presence in the rural areas.



As the 1970s drew to a close, the bank had managed to achieve its primary aims regarding the RRP. Some 94% of all farms had been mechanised, and most farmers had set up savings accounts in the bank, which further provided them with financial security.

Diversification
Despite its instrumental role in the success of the RRP in the 1970s, the company was one of the largest beneficiaries of the Corraile welfare programme in the 1970s, becoming the largest single financial liability within the RRP, surpassing even the heavy subsidies levied upon farming equipment. With the voting out of the Labour Government in 1982, the company saw reduced funding from the Conservative government that came to power. The Vickers administration reduced the funding allotted to the continuation of the bank's daily operations, which forced the bank's management to seek other ways of overcoming this shortfall in funding. Thus, in 1983, the bank diversified into agricultural trusteeship, investing into major farms and sometimes buying them outright. This was later spun off into a separate subsidiary, PSB-Agritrust.

With few other banks operating in the rural areas of Corraile, the bank's customer base continued to grow steadily, reaching a total size of 1 million by 1986. The bank also entered investment financing as well, investing in a 10.0% stake of Corraile Airlines.

Initial privatisation efforts
In 1988, the government formally ended the RRP, justifying that it had been enough of a success that it was no longer necessary. This placed the future of the bank in doubt, especially since the bank was considered a part of the RRP. Soon after the announcement of the end of the RRP and its associated rural welfare programmes, the Corrailite government began to draw up plans for the eventual privatisation of the bank.

However, by that point in time, the bank had become a banking behemoth, with much waste and inefficiency within its protocols. This meant that the bank was haemorrhaging cash at an unsustainable rate without government support. In the same year that the privatisation effort began, the bank posted a total annual loss of over CR$146 million, proving the bank's structural weaknesses that made privatisation unfeasible.