Tk5,000cr refinance scheme launched to ensure food security

The Bangladesh Bank has launched a Tk 5,000 crore refinancing scheme for the agricultural sector, in a bid to increase domestic production and prevent food grain shortages amid global price hikes triggered by the Russia-Ukraine war.

In this regard, the central bank’s Agricultural Credit Division (ACD) issued a circular on Thursday. Under this scheme – to continue till June 2024 – small, marginal and sharecropper farmers can take out up to Tk 2 lakh in loans for cultivation of crops and fruits.

The interest rate on the loan is 4 per cent (simple interest), and the crops will serve as collateral. The loan has to be repaid in 18 months with a grace period of 3 months. The Bangladesh Bank had earlier approved this initiative at a board meeting on October 27.

Speaking to The Business Post, agro economist and former director general of Bangladesh Institute of Development Studies (BIDS), Quazi Shahabuddin said, “This is a good initiative, and it will help ensure food security in the country.

“But just disbursing credit will not be enough. Farmers should be guided on how to utilise the loans. Besides, from the banks' side, there can be no complications in the loan disbursing process.”

‘Ensure loans reach marginal farmers’

Noted economist and Chairman of Palli Karma-Sahayak Foundation (PKSF) Qazi Kholiquzzaman Ahmad said, “The new scheme will undoubtedly play a good role along with other government initiatives such as subsidies and agro credit programmes.

“However, attention should be given to ensure that the loans reach marginal farmers. It is known for a fact that credit through banks does not reach the level of marginal farmers. In this case, non-government organisations (NGOs) should be used for proper disbursement.”

It should be noted that as per the central bank circular, the participating banks under this scheme will have to ensure disbursement of loans to farmers/customers through their own network.

Such a bank can distribute loans under this scheme on the basis of necessary verification as per agricultural and rural credit policy. The policy dictates that such loans can be disbursed only against the related crop liability, and for cultivation on up to 5 acres of land for food grains.

In case of crops that are not food grains, a bank may decide on the acceptance of minimum collateral/subsidiary collateral based on the bank-customer relationship.

This loan cannot be used to settle any previous loans of a customer. If any farmer/customer defaults, he/she will not be able to take the loan under this scheme. If there is evidence that the loan is not utilised properly, additional 2 per cent interest will be charged, the circular read.

Separate accounts will be maintained for each loan disbursed under the scheme. Loan statements will be submitted to the ACD on a monthly basis – within 7 working days of month end – by the lender bank.

Banks have been instructed to conduct proper publicity campaigns for disbursement of these loans. The campaign will be conducted through the branches before the start of a crop cultivation season, and apart from that, banners will be placed at easily visible places on a branch.

Assistance from the local agricultural extension office should be taken to identify genuine farmers, read the circular.

In September last year, a Tk 3,000 crore refinancing scheme was launched to help the agriculture sector cope with the impacts of the Covid-19 pandemic.

Meanwhile, in September this year, the central bank launched a Tk 1,000 crore refinancing scheme for wheat and maize farmers, as Bangladesh sought to reduce import dependence and increase the cultivation of staple grains.

The World Bank will also help increase the income of 1.7 lakh poor people who are at risk of climate change by increasing agricultural and fish production. For this purpose, the global lender approved $120 million in assistance to Bangladesh in March this year.

Besides, a target of Tk 30,911 crore for the disbursement of agricultural loans has been set for the current financial year of 2022-23, which is 8.88 per cent higher than the previous FY.