Bangladesh Bank has announced a new policy to boost credit flow to the agriculture sector. A target of Tk60,000 crore has been set for agricultural and rural credit disbursement by banks for the current FY27.
Simultaneously, banks are now mandated to allocate at least 4% of their total loan disbursements to the agricultural sector.
Previously, banks were required to disburse at least 2.5% of their total loans to agriculture.
The new target is 53.85% higher than the previous fiscal year's target of Tk39,000 crore.
This means the agricultural and rural credit target has increased by Tk21,000 crore in the span of a single fiscal year.
The Agricultural and Rural Credit Policy and Program for the FY27 was announced on Monday (August 17) at a press conference held at Bangladesh Bank's headquarters.
Bangladesh Bank Governor Md Mostakur Rahman highlighted various aspects of the policy at the event.
During the same ceremony, Bangladesh Bank inaugurated the "Web-based Agricultural Credit Management Information Software" to strengthen the monitoring of agricultural and rural credit activities.
Out of the new target, Tk20,495 crore has been set for state-owned commercial and specialized banks, while Tk39,505 crore has been allocated to private and foreign commercial banks.
Bangladesh Bank stated that the primary objectives of the new policy are to increase production by ensuring adequate credit flow to the agricultural sector, revitalize the rural economy, and assist in controlling inflation.
Special emphasis has also been placed on facilitating easier credit access for marginal farmers, female farmers, and rural communities.
Under the new policy, for loans up to Tk5 lakh in the fisheries and livestock sectors, provision has been made for alternative collateral instead of traditional land or immovable property collateral.
This includes arrangements such as personal guarantees, social guarantees, and group guarantees.
This measure has been introduced specifically to simplify financing for women and marginal farmers.
Furthermore, banks have been directed not to accept any additional charge documents other than those specified in the policy for loans up to Tk5 lakh in the fisheries and livestock sectors.
In addition, instructions have been given not to require extra documents beyond those prescribed in the policy for disbursing loans for salt production on land up to 2.5 acres.
Bangladesh Bank has introduced a new method for identifying genuine farmers.
Attestations from local agricultural extension officers, sub-assistant agricultural officers, fisheries officers, or livestock officers can now be used. Additionally, data from government-issued Farmer Cards can be used to verify a farmer's identity.
The requirement to hold or issue a passbook to obtain agricultural loans has been abolished under the new policy, simplifying the loan application process for farmers.
Credit distribution under contract farming has also been made easier by relaxing the requirement to obtain prior approval from Bangladesh Bank before disbursing such loans.
The policy clarifies opportunities for disbursing loans not only to individual farmers but also to farmer groups or livestock/fisheries group operators across crop production, fisheries, and livestock sectors.
Furthermore, the maximum limit on the number of members in a farmer group has been relaxed.
Loan distribution to groups engaging in income-generating activities in rural areas beyond traditional agriculture has also been enabled, which Bangladesh Bank believes will expand joint financing opportunities for micro and marginal entrepreneurs.
As in previous years, several new sectors have been brought under the agricultural and rural credit scheme.
Notable additions include fish fry production in hatcheries, poultry chick production, and camel farming.
Additionally, loan coverage has been extended to the cultivation of silk cotton root (shimul mool), ashwagandha, sugar candy seeds (mishri dana), roselle, asparagus (shatamuli), yam (gach alo), blueberry fruits, and organic fertilizer production using eggshells.
Recognizing the growing risks posed by climate change to agriculture, the new policy provides an opportunity to bring farmers under insurance coverage.
Subject to mutual consent between the bank and the farmer/client, insurance facilities can be linked with agricultural loans. The central bank expects this to reduce farmers' financial exposure to natural disasters or climate-induced damages.
To further enhance agricultural financing, summaries of a Tk10,000 crore refinance scheme and a Tk3,000 crore refinance fund policy have been integrated into the new program.
Amendments have also been made to Bangladesh Bank’s management policy regarding the Agriculture Development General Fund.
Repayment aligned with crop cycles
The new policy incorporates revised production calendars and repayment schedules for various crops.
Timeframes for loan distribution and harvesting schedules have been defined for year-round cultivation of crops such as banana, papaya, mango, lemon, guava, and litchi.
To relieve farmers from immediate repayment pressure right after harvest, repayment arrangements have been scheduled according to specified post-harvest timelines.
To monitor the distribution and utilization of agricultural and rural credit more effectively, Bangladesh Bank launched the "Web-based Agricultural Credit Management Information Software."
This system will streamline data collection, monitoring, and analysis for the overall agricultural credit program.
Bangladesh Bank officials stated that this system will play a crucial role in identifying true beneficiaries, tracking credit flow, and utilizing necessary data for policymaking.