Trading, other activities eat up major part of farm credit

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Nazmul Ahsan
A large part of low cost agriculture credit disbursed by the scheduled banks goes to trading and other activities instead of farmers.
Only about Tk 3.80 billion was disbursed as crop loan in 2008-2009, which constituted only 33 per cent of the total agriculture credit disbursed during the period.
According to the latest data of the Bangladesh Bank (BB), the amount of disbursed agriculture credit in 2008-2009 was Tk 92.84 billion against the target of Tk 93.79 billion. Of the total, government-owned banks and institutions disbursed Tk 73.31 billion while the remaining amount was disbursed by private commercial banks.
Experts, however, support the diversification of agriculture credit beyond the crop sub-sector to ensure the sustainability of marginalized farmers. They said the current trend of agriculture
credit disbursement is on the right track as it accommodated the necessity of agriculture machines and trading as boosters to agriculture.
The target of agriculture credit for the current 2009-2010 fiscal year has been fixed at Tk 110 billion. The interest rate for such credit is 8.0 per cent and 12 per cent to be applicable for government-owned banks and private commercial banks respectively.
According to the BB data on agriculture loan, Tk 30.84 billion was disbursed as crop loan, Tk 1.02 billion against irrigation equipment, Tk 1.07 billion against agriculture equipment, Tk 4.64 billion against livestock, Tk 4.77 billion for fisheries, Tk 3.10 billion for grain storage and marketing and Tk 19.45 billion for poverty alleviation. Tk 27.93 billion was disbursed against other activities during the previous fiscal year.
Bankers employed in rural areas said above 90 per cent of agricultural credit disbursed among farmers is actually invested in trading and cottage industries, instead of agriculture or crop production.
The bankers seldom make on-the-spot inspection to see whether the loans disbursed are being used properly.
"Not even 10 per cent of the agricultural credit is invested in agriculture sector as the agriculture is no longer a profitable activity," a Sonali Bank officer, who works in a branch of Brammanbaria district, said.
"We are always encouraged to disburse more agricultural credit to farmers. Supervising credit operation is least encouraged," he added.
The banker, however, said rural poor actually opt for low cost agricultural credit to invest in their home-based productive activities, shops or to meet their personal or household needs.
Among all banks and institutions, Bangladesh Krishi Bank topped the list of lenders as the bank alone disbursed Tk 38.23 billion during 2008-2009 followed by Tk 8.80 billion by Rajshahi Krishi Unnayan Bank, Tk 6.93 billion by the Bangladesh Rural Development Bank, Tk 6.29 billion by the Sonali Bank and Tk 5.63 billion by the Janata Bank.
Ibrahim Khalid, Chairman, BKB, said the current trend of agricultural credit disbursement, which covers areas like crop, live stock, agriculture equipment, micro-credit and grain storage and marketing, is an appropriate one.
"Farmers could not sustain if agricultural credit is confined to crop loan only," Khalid, also a former Deputy Governor, BB, told the FE.
'Above 50 per cent of the rural farmers are share-croppers, who need to diversify their earning portfolio for their own sustainability.'
Agriculture expert, Uttam Kumer Dev, Head of Research Division, Centre for Policy Dialogue, said the present system of agricultural credit disbursement is balanced one as heads like agriculture equipment and irrigation equipment are brought under the agricultural credit to cater to the equipment needs of farmers.
"There is no need to increase the share of crop loan under the agricultural credit," Uttam told the FE.