Farm loan declining: survey

Farm loan has been declining for the last few years thanks to the reluctance of private and foreign banks to provide financing to the agriculture sector, a survey found.

Agriculture loan accounted for less than 6 percent of the total outstanding loans in 2016-17, down from 8 percent in the 2011-2013 period and 10 percent in 2006-07.

The share of agricultural loan started falling in 2014, according to a research, “Addressing agriculture through value chain financing -- how to attract banks”, conducted by the Bangladesh Institute of Bank Management (BIBM).

Md Mohiuddin Siddique, director of BIBM, presented the research paper at a workshop held at the BIBM auditorium in the city yesterday when Toufic Ahmad Choudhury, director general of the BIBM, chaired the session.

Private and foreign banks' share in farm loan remained steady at 2 percent since 2011-12, according to the research, which surveyed 24 banks.

Some 82 percent of the respondent banks said they now have the capacity to give more emphasis on agricultural finance.

Meanwhile the rest 18 percent opined that the banks' lack of manpower and expertise are holding them back from going for such financing, according to the survey.

All 24 provide farm loans at the production stage.

Among them, around 68.18 percent of the banks provide loans to the farmers for marketing purposes while the rest have showed a lack of storage facilities, undeveloped system, lack of demand and information for not taking part in such financing, the survey found.

Analysis of information from the past four years revealed that the majority share of agricultural credit goes to crops.

The number of farm loan borrowers grew to 40 lakh in 2016-17 from 30 lakh in 2011-12.

Although around 52 percent of their borrowers are female, male borrowers got 60 percent of the total agricultural credit.

Among the borrowers working at different stages of the agricultural value chain, farmers have a large share in the existing agricultural credit facility, according to the report.

Small and marginal farmers got 69.06 percent of the agri loans last fiscal year while 11.41 percent went to the sharecroppers.

Banks provide agri finance mainly to comply with the mandatory rules of Bangladesh Bank, said SM Moniruzzaman, deputy governor of the banking watchdog.

The banking sector now badly needs the diversification of areas of business and inclusion of a new class of borrowers, he said.

“So, value chain financing may be one significant area for further growth of the banking industry.”

Banks should have a comprehensive agri loan model so that all stages of the value chain—from growers to consumers—come under the credit facility, said Helal Ahmed Chowdhury, supernumerary professor of BIBM.

The model of value chain financing will make the price of agricultural products competitive, he added.