Only a small number of banks have so far disbursed agri loans
Banks are very slow in disbursing loans to the agriculture sector from the Tk5,000 crore stimulus fund, despite the sector being badly affected by the protracted pandemic and flooding.
As per the latest Bangladesh Bank (BB) data, the country’s banks disbursed only Tk590.40 crore to the farm sector from the stimulus fund till July this year. Of the total disbursed loans, Bangladesh Krishi Bank alone has disbursed Tk304 crore.
As many as 43 banks had signed participation agreements with the BB on disbursing farm credit from the low-cost stimulus fund.
However, only a small number of banks have so far disbursed agri loans.
To tackle the economic losses consequent upon the outbreak of the deadly virus, on April 14 the BB launched a Tk5,000-crore stimulus fund for the agriculture sector. The tenure for the loans was set at 18 months, including a grace period of six months.
Banks will borrow the funds at 1% interest rate and will lend at 4% to farmers in line with BB guidelines.
The stimulus fund did not reach the marginal farmers due to the collateral issue and the bureaucratic complexities of banks, according to experts.
However, bankers have blamed the countrywide shutdown from March 26 to May 30 imposed by the government to halt the spread of the coronavirus, leaving credit operations of banks and non-governmental organizations, also known as microfinance entities, almost suspended.
Talking to Dhaka Tribune, Bangladesh Krishi Bank managing director Ali Hossain Prodhania said that not only agriculture credit but also overall loans disbursed by the scheduled banks had remained almost suspended during the countrywide shutdown. Banks started to disburse loans from the stimulus funds from June this year, he added.
The Bangladesh Krishi Bank (BKB) has disbursed Tk304 crore to 16,444 farmers from the funds till August 09, he stated.
The BKB also formed a Tk300 crore special fund for farmers on the occasion of Bangabandhu’s 100th birth anniversary and has already disbursed Tk176 crore among affected farmers from the fund, Ali Hossain Prodhania informed Dhaka Tribune.
The BB also introduced another program to provide agricultural loans at 4%. Under the program, banks enjoy 9% interest on disbursed loans, while the BB provides the remaining 5% in subsidy. The country’s farmers will be entitled to the subsidized loans from April 1 this year to June 30 next year.
Only nine banks have disbursed Tk286 crore till June under the program, as per BB data.
However, the farm loans disbursement data of July is yet to reach the BB, said a BB high official.
The country’s commercial banks, except for BKB, have less experience in providing agriculture loans, according to Zahid Hussain, former lead economist of the World Bank’s Dhaka office.
Besides, marginal farmers did not want to come to bank branches due to various bureaucratic complications including co-lateral issues, he added.
Zahid Hussain has said this might be the reason for the slow disbursement of loans to the agriculture sector from the stimulus fund.
In such a case, microfinance institutions could play a vital role in providing the fund among marginal farmers, who have been hugely affected by the coronavirus, he suggested.
In the concluding fiscal year, farm loan disbursement by the country’s banks had failed to achieve the target with the country’s economic activities remaining halted for around two months owing to the deadly virus.
Disbursement of farm loans stood at Tk22,749.03 crore in the 2019-20 fiscal year, which was 5.70% or Tk1,375 crore less than the target of Tk24,124cr, according to the BB data.