Bangladesh Bank (BB) on Wednesday raised the agriculture and rural loan disbursement target for the current fiscal year, up above 15% on the last fiscal’s disbursed amount, although the scheduled banks failed to achieve the target of the concluding fiscal year.
The central bank set the target at Tk26,292 crore for the current FY21, which was Tk24,124 crore for the concluding fiscal year.
In the concluding fiscal year, however, scheduled banks could disburse only Tk22,749 crore as farm loan, which was 5.70% or Tk1,375 crore less than the target.
Every year, Bangladesh Bank announces the target through a press conference, but this year it took to unveiling the “Agriculture and Rural Credit Policy and Programme for FY21” on its website on Wednesday.
In the policy the BB asked banks to reduce dependence on MFIs (micro finance institutions) and emphasize more their own networks when it came to lending to the farm sector.
“Considering agriculture a priority sector, usually the central bank sets the interest rate on farm loans at 2-3% less than the major credit products of banks. But if banks disburse through NGOs or MFIs the rate goes up to 19-25%,” said a high official of the central bank.
If the loans are disbursed through bank branches, farmers could get them at 9% interest rate, he added.
Of the total loans disbursed in the farm sector, 30% to 35% are typically disbursed through NGOs and MFIs, as per central bank data.
The country’s banks could not achieve the farm loans disbursement target for the first time in the last fiscal year since the BB had fixed the target for disbursement of farm credit, due to the economic activities coming to a halt owing to the coronavirus pandemic, BB’s executive director Ashok Kumar Dey told Dhaka Tribune.
Altogether 30,66,786 borrowers got the farm credit in the last 2019-20 fiscal year, according to the BB.
Of the borrowers, the number of women borrowers was 15,14,367 receiving Tk8,359.93 crore.
Small and marginal farmers numbering 23,64,888 received around Tk16,250 crore from the banking sector during the period. Besides, Tk21.21 crore was lent to 7,179 farmers in char, haor and less developed areas of the country, according to the data.
For the current fiscal year, the BB eased the rules for private commercial banks and foreign banks on minimum agricultural credit disbursement.
Commercial banks will have to disburse a minimum of 2% to the agriculture sector of their total loans and advance in the current fiscal year.
Previously, these banks were supposed to disburse a minimum of 2.5% in agriculture credit of their total loans and advance.
The BB took the decision considering the capacity of banks and shortage of branches, said a BB official.
In the current fiscal year, banks will have to disburse 60% of the targeted agricultural loan in the crop sector, 10% in fisheries, and 10% in the livestock sector and the remaining portion to be disbursed to other sectors linked to the rural economy.
The credit information bureau (CIB) report from the BB has been made mandatory for farm loans above Tk250,000.
The new policy lays stress on providing loans for seed production and sale, rearing goats and sheep and cattle fattening, Turkey bird rearing, etc.
The credit policy asks for a settlement of loans by 10 days from the day of loan application and for a provision of loans to eligible tenant farmers on easy terms and through procedures.
The Agriculture and Rural Credit Policy and Programme also states that women and high-valued crop sectors will be given priority in receiving farm credit.
