Banks asked to disburse more farm loans than target

Bangladesh Bank yesterday asked private banks to speed up their farm loan disbursements to enhance the country's food security.

As such, lenders have been asked to give out 30 per cent more loans instead of sticking to the annual disbursement target set by the central bank.

A Bangladesh Bank official said the central bank instructed to increase food production to tackle any unexpected food crisis in the country while the entire globe was facing an escalation of food prices.

Bangladesh Bank set a loan disbursement target of Tk 30,911 crore for this fiscal year. Of the target, banks disbursed 31 per cent between July and October, showed data from the central bank.

Selim RF Hussain, chairman of the Association of Bankers, Bangladesh, said the country's farm sector accounts for around 12 per cent of its gross domestic product (GDP).

However, the trend of farm loan disbursement has not reached a satisfactory level yet given the agriculture sector's contribution to the GDP.

"So, banks should gear up the farm loan disbursement to make the economy strong," said Hussain, also managing director of Brac Bank.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said the world may face food shortages sometime soon as per the projections given by several global organisations.

"Although there is no such projection for Bangladesh, we should fortify our food security to avert any unexpected situation," he said.

Bangladesh Bank formed a Tk 5,000 crore refinance scheme last week to ensure food security in the country as the banking regulator thinks the world might face a food crisis in the days to come.

The prices of several food items have gone up in global market, which is why the central bank has formed the fund such that farmers can get low-cost loans.

Under the scheme, farmers will be able to take loans at 4 per cent interest.

The central bank in the meeting also urged the banks to increase farm loan disbursements through their own channel.

As per the central bank policy, private banks are allowed to attain 70 per cent of their annual farm loan disbursement target through microfinance institutions (MFIs).

Farmers can avail farm loans at 9 per cent interest from banks but the rate increases to as much as 25 per cent if they take it from MFIs.

Many private banks usually disburse the majority of their farm loans through MFIs as they do not have branches available in rural areas.