Banks show lacklustre performance in disbursing farm stimulus
Banks are still far from meeting the disbursement deadline for farm loans under the associated stimulus package of Tk 5,000 crore as a third of the fund is yet to be given out.
When the package was announced in April last year in the form of a refinance scheme, Bangladesh Bank asked banks to give out the fund by September 30.
But they had repeatedly exhibited a poor performance to this end, forcing the central bank to extend the timeframe twice.
On December 29, banks were asked to fulfil their disbursement target by March 31 but they have so far distributed Tk 3,411 crore, or 68 per cent of the package, according to data from the central bank.
A total of 144,903 clients have availed the fund in attempts to make their businesses vibrant.
Participation agreements with the central bank have been signed by 43 banks to disburse loans from the stimulus fund dedicated to reviving the agriculture sector.
Of them, 16 achieved less than 30 per cent of their respective loan disbursement target set by the banking regulator till January 15, an unwelcome development as the government looks to make a prompt recovery from the economic fallout of Covid-19.
The 16 are IFIC, Trust, First Security, Standard, Southeast, Mutual Trust, Jamuna, NRB Global, BASIC, Dhaka, Bangladesh Commerce, Al-Arafah, Social Islami, South Bangla Agriculture and Commerce, Shimanto and Union.
The tenure for the loans is 18 months, including a grace period of six months at both the banks' and clients' ends. Banks will borrow from the refinancing scheme at 1 per cent interest rate and lend at 4 per cent.
Farmers engaged in five agricultural sub-sectors are entitled to enjoy the low-cost fund.
These are: fruits and flowers, fisheries, poultry, dairy and livestock and the businesses selling agriculture commodities.
The central bank has repeatedly asked the lenders to expedite disbursements but some of them did not take the issue with the utmost importance, said a Bangladesh Bank official.
The BB now plans to allocate the undisbursed portion of the 16 banks to the outperforming lenders, he said.
It is not a good thing that banks are still far away from implementing the stimulus package, said Khan Ahmed Sayeed Murshid, director general of the Bangladesh Institute of Development Studies.
They should have given out the fund within the first deadline set by the central bank, which was September 30, in the interest of the country's economic recovery, he said.
Banks can explore alternative ways of speeding up the loan disbursement if they face difficulties to distribute the fund through their branch networks, Murshid said.
"The agent banking window of banks can be one of the good solutions," he said.
Banks should fulfill the target within March keeping in mind the upcoming Boro season, he said.
Bangladesh Krishi Bank (BKB), one of the top performers in terms of loan disbursement under the package, took several initiatives to cater to farmers with the fund, said its managing director, Md Ali Hossain Prodhania.
The bank has prepared a dedicated software in monitoring the stimulus package such that branches of the lender take required measures to disburse the fund in time, he said.
"Every branch manager has to put data on the software. And the higher-ups supervise the activities on a daily basis, which has helped speed up the loan disbursement," he said.
The BKB, which is also a specialised lender for the farm sector, disbursed Tk 1,570 crore till January 15 against its target of Tk 1,699 crore.
The lender has recently applied to the central bank to allocate an additional fund of Tk 200 crore under the package, Prodhania said.
"We also got success for implementation of the stimulus package for the SME sector by way of using the method," he said.
Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said the lenders which had disbursed farm loans through the microfinance institutes (MFIs) for years faced obstacles in disbursing the fund.
There is no scope to disburse the stimulus fund through the MFIs loans, creating a difficult situation for banks, he said.
Officials of the rural branches are hesitant in disbursing the fund as a large number of borrowers have applied to enjoy loans without collateral securities, he said.
"We will definitely achieve the target within March. And necessary measures have already been taken," Rahman said.