BANKS are still far from completing farm loan disbursement by the deadline and meeting the annual target for the 2021 financial year. Despite repeated central bank reminders, the monthly average disbursement of farm loans remained behind the target in the first three quarters of the financial year. The central bank in its annual agricultural and rural credit policy and programme has plans to disburse Tk 26,292 crore, of which Tk 18,513.31 crore has so far been disbursed. The central bank in April decreased the interest rate for farm loans by 1 per cent to expedite the process. Bangladesh Bank officials say that they closely monitor the farm loan disbursement and hope that the target for credit issuance would be fulfilled. Private commercial and foreign banks, however, appear reluctant at disbursing farm loans despite a renewed emphasis on keeping crop production unharmed by the Covid outbreak. Given that the banks failed to meet the target in the past financial year and the financial year has only two months left, the central bank needs to do more than just closely monitoring the credit issuance.

An access of farmers to easy-term loan services is considered critical for crop production. It is even more important at a time when farmers have endured the Covid impact and suffered losses in 2020 flooding. The disbursement of farm loans has maintained a declining trend in the current financial year. Earlier, central bank officials and private bank executives cited the prevailing liquidity crisis as a reason for the declining rate of loan disbursement. The liquidity shortage is a result of major corruption and governance failures in the banking sector and it has hindered rural farmer’s access to financing. There are allegations that the loan disbursed is also not reaching the farmers in the margins. Banks reportedly prefer financing the borrowers involved in marketing farm products than financing actual crop production in which everyday rural farmers are involved. Farmers also complain that a complicated loan process has made loan services inaccessible for them. Policy provisions for banks to disburse farm loans in low interest is not, therefore, enough to create an equitable access for farmers.

About 40 per cent of the labour force is directly employed in the agricultural sector and the number will grow in near future given that many wage labourers from urban areas have returned to rural areas during the Covid outbreak. It is time that the central bank reviewed its farm loan policy and ensured that private banks comply with the loan disbursement schedule and target. The government must, meanwhile, consider the farmer’s need in the next budget and ensure an equitable access of farmers to all financial services, including farm loans.



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