Managed to give out only 45.4% of the Tk 5,000cr fund in six-and-a-half months
Banks are struggling to disburse funds from the Tk 5,000 crore rescue package announced by the government on April 13 for the farm sector for want of experience in giving out agricultural loans.
As of October, the banks have disbursed Tk 2,268.4 crore, meaning they have a little over a month to give out the entire sum, according to the latest data from the Bangladesh Bank (BB).
“The country’s commercial banks except for Bangladesh Krishi Bank (BKB) have less experience in providing agriculture loans,” said 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 collateral issues.
“This might be the reason for the slow disbursement,” he added.
As many as 43 banks have signed up with the central bank to disburse the agri-stimulus fund and most of them have disbursed 0.7 per cent to 7 per cent of their allotted sum.
One Bank has disbursed the lowest amount: Tk 62 crore.
Contacted, One Bank Managing Director M. Fakhrul Alam said he is confident it would be able to complete its disbursement target within the central bank deadline of December 31.
Similarly, Modhumoti Bank’s MD Shafiul Azam is hopeful that it would be able to disburse its allotted amount within the deadline.
The bank has so far disbursed at 10 per cent of its target as of last month.
Azam blames the delay on the lack of experience in disbursing agriculture credit.
“We are just not used to it,” he added.
Dhaka Bank though is faring better. The bank has disbursed 30 per cent of its target, according to its MD Emranul Huq.
The effects of the pandemic and floods were the reasons for the delay, he said, adding that the agricultural loans have to be distributed centred on the season.
The bank is confident of meeting its target by the year-end, he added.
“It is not possible to complete the disbursement process by December -- the deadline should be extended further,” said Syed Mahbubur Rahman, MD of Mutual Trust Bank.
The bank has managed to disburse just 7 per cent of its allotted sum to 57 farmers so far.
Disbursing loans for the farm and small- and medium-sized enterprises sectors are more time-consuming than for large industries.
“In the case of farm loans disbursement, a small amount has to be disbursed among many customers, which is very difficult for us as we are not used to disbursing agricultural credit.”
The central bank encourages banks to disburse farm loans through own channels but most of the lenders have no branches in the remote areas, which is another reason for the slow disbursement, said Rahman, also the former chairman of the Association of Bankers, Bangladesh, a platform of banks’ managing directors.
BKB, Rajshahi Krishi Unnayan Bank (RAKUB), Rupali Bank, Brac Bank and Exim Bank have managed to disburse a good amount to the farm sector so far.
For instance, Rakub has disbursed its allotted sum already and lent more. BKB has disbursed 88.2 per cent of its total target among 52,428 farmers as of October.
Disbursement by state-run banks from the package has been satisfactory but most private banks had disbursed a poor amount of loans from the stimulus package, said a high official of the central bank.
“We always put pressure on the banks about their very poor disbursement performance,” he added.