Small farmers do not benefit from agricultural loans

If he wanted to persist in getting the loan, he would have to hire a broker and spend another 2,000 to 3,000 Tk.

Millions of small farmers, like Saddam, feed the people of Bangladesh by keeping agriculture alive. But they could not take advantage of the government’s initiative to borrow from banks at lower interest rates. Rather, the advantages of such housing benefit large farmers and traders.

Fakir Mahitul Islam, president of the Bagerhat Shrimp Farmers’ Association, told that those who need a loan of TK 50,000 or TK 100,000 do not get it. But in Bagerhat, most of the farmers are small sharecroppers who need small loans.

Farmers work in the fields of Sadar Upazila in Gaibandha during the foggy winter morning of Sunday, January 31, 2021.

Mithu Chakraborty, a farmer from Kachua in Bagerhat, alleged that corruption and bureaucracy were rampant in the agricultural lending industry.

“After I received training from Youth Development, they offered me a loan of TK 50,000,” he said. “For this they asked for a bribe of 5,000 TK. I did not take this loan.”

The Bangladesh Bank has ordered the interest rate on agricultural loans to remain 1% lower than on other loans, prioritizing the agricultural sector. As a result, the maximum interest rate on any loan other than credit cards is 9 percent, so the interest rate on the farm loan has been set at 8 percent.

However, private banks can disburse 70 percent of total agricultural credit through other channels if they wish. Banks take this opportunity to disburse agricultural loans through microfinance institutions.

And small farmers pay the price because microfinance institutions charge interest up to three times the interest rate set by the government. But small farmers, who are unable to finance themselves from the banks, have no choice but to turn to them.

Montu Chandra, a farmer from Kanura village in Kalmakanda of Netrokona, said: “Banks don’t lend small amounts of money, so we don’t go to the bank. If we need money, we take loans from NGOs.

Farmers work in the bean fields at Kalatia in Keraniganj in Dhaka. Photo: Kazi Salahuddin Razu

Dulu Mia, a farmer from Itakhola in Nilphamari Sadar, said: “Big farmers get loans from banks, not us. If we need money, we take loans from NGOs like ASA, BRAC.

But due to weak central bank policies and reckless audits, small farmers have to pay interest at a maximum rate of 25 percent, while the maximum interest rate on bank loans is 9 percent. .

According to data from the Bangladesh Bank, in the first quarter of fiscal year 2021-22 (July-September), a total of TK 52.12 billion in agricultural and rural loans were disbursed in Bangladesh, or 11, 23% more than the same period in the last fiscal year.

And in fiscal year 2020-2021, banks disbursed a total of Tk 255.11 billion in agricultural and rural loans in the country, which is 97.03% of the total target.

The disbursement of this loan is Tk 27.62 billion, or 12.4% more than the previous fiscal year 2019-2020.

Regarding the increase in disbursement of agricultural loans, Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said some banks failed to meet the target last year. They did their best to increase the distribution of agricultural loans to avoid sanctions.

In addition, micro-credit institutions were particularly dependent on an increase in agricultural credit this time around, the banker said.

Bean blossoms are blooming in the fields of Kalatia in Keraniganj in Dhaka, raising hopes of farmers for profit as winter approaches. Photo: Kazi Salahuddin Razu

It is clear from the words of the former head of the Association of Bankers Bangladesh (ABB), an organization of bank managers, that small farmers do not benefit from loans directly from the bank at low interest rates, even if the distribution of agricultural credits increases.

According to the central bank, in fiscal year 2019-2020, 40 private banks disbursed Tk 116.54 billion in agricultural loans, of which 63 percent was disbursed through microcredit institutions.

Although government banks disburse most of their agricultural loans through their own channels, private banks do not. There are allegations that some private banks do not even follow instructions to disburse at least 30% of agricultural loans through their own channels.

However, Ali Reza Iftekhar, chairman of ABB and managing director of Eastern Bank, is reluctant to accept claims that marginal farmers have not received agricultural loans from banks.

“Marginal farmers get loans from banks,” he said. “However, banks that do not have branches in remote areas provide loans through microfinance institutions.”

Sirajul Islam, spokesperson and executive director of the Bangladesh Bank, agreed.

“Marginal farmers get money from banks,” he said. “However, where there is no bank branch, the money is paid via microcredit.

“The interest rate for microcredit is a bit higher. We aim to ensure that farmers get money at low interest rates, ”he added.

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