INADEQUATE attention to agriculture has affected the steady growth in the agricultural sector. Such a phenomenon is reflected in the declining share of agriculture in the gross domestic product over the past four decades. Access of marginal farmers to easy-term loans is considered critical for their crop production. For current financial year, the Bangladesh Bank has set a farm loan disbursement target of Tk 21,800 crore; it has also taken a move to cut down the lending rate on farm loans by 1 percentage point to 8 per cent. Despite a fixed target, farm loan disbursement, as New Age reported on Monday, has dropped to 2.81 per cent, or Tk 406.86 crore, in the July-February period of the current financial year. A recent survey of the Bangladesh Institute of Bank Management shows that farm loan has declined for the past few years because of the reluctance of private and foreign banks to offer financing in the agriculture sector. Central bank officials as well as the private sector bank executives named the prevailing liquidity crisis for the declining rate of loan disbursement in the sector. Liquidity shortage created as a result of the major crisis in the banking sector has, therefore, hindered access of farmers to agricultural financing services.
The central bank record shows that banks disbursed Tk 14,113.56 crore in farm loans in July-February of the 2019 financial year. However, past happenings suggest that the disbursement of farm loan does not ensure marginal farmers’ access to easy-term loans. Farmers continue to face interest rate as high as 25 per cent on agriculture loans as many banks prefer to disburse them through non-government organisations that keep a cut for themselves. In the process, the central bank’s purpose to extend low-interest loans to farmers is defeated. When the loans are disbursed through bank branches, farmers can get them at 9 per cent interest, but when they are disbursed through non-governmental organisations and microfinance institutions, the rate goes up to 20–25 as they take the funds from banks first at 9 per cent interest and then give them out to farmers. In this regard, the central bank earlier instructed lenders to distribute at least 30 per cent of their annual farm loan disbursement target through their respective branches, but a number of banks have disregarded the rule. In 2017–18 financial year, at least 26 banks disbursed more than 70 per cent of their farm loans through non-governmental organsiations, but the central bank has not taken any punitive measures against them. In addition to bank’s dependency on NGO channel, they also reportedly prefer financing the borrowers involved in marketing farm products than financing actual crop production in which everyday rural farmers are involved.
The government, under the circumstances, must review its banking policy for the agricultural sector and ensure marginal farmers’ access to financial services and loan facilities. In doing so, it must also address the gross irregularities and misgovernance in the banking sector that has resulted into this liquidity crisis.
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