Agri loan disbursement down 21.48pc in July-October

Agricultural loan disbursement in Bangladesh experienced a noticeable downturn during the first four months of FY25 compared to the same period of the previous fiscal year.
The Bangladesh Bank (BB) data shows disbursement stood at Tk 93.91 billion in July-October of FY25, down from Tk 119.6 billion in the corresponding period of FY24.
This represents a significant 21.48- percent decline, raising concerns about the potential impacts on the agriculture sector and rural economies.
Such loan disbursement in October FY25 amounted to Tk 29.33 billion, reflecting a year-on-year decline compared to the same month in FY24. In October FY24, disbursement reached Tk 31.35 billion.
To meet the disbursement target, banks are allowed to use their own networks (branches, sub-branches, agent banking, contract farming, and group loans) and bank-mobile financial service (MFS) linkages.
This year, 60 per cent of the total target must be disbursed for crops, 13 per cent for fisheries, and 15 per cent for livestock, according to the central bank directives.
Until October FY25, the outstanding balance of farm credit with interest reached Tk 550.84 billion, marking a slight increase compared to the same period in the preceding financial year.
The outstanding balance of such credit was Tk 548.62 billion in October FY24, the central bank data revealed.
On the other hand, credit recovery was recorded at Tk 123.22 billion in July-October of the current fiscal year, which was 12.58 per cent higher than the same period of FY24. This was Tk 109.48 billion in the same period of the last fiscal year.
Policy Exchange of Bangladesh Chairman and Chief Executive Officer Dr M Masrur Reaz stressed the critical need to enhance domestic agriculture production to safeguard the country's food security for a population exceeding 170 million.
He emphasised that ensuring uninterrupted food supply and agricultural production is paramount, highlighting the significance of farm loans in attaining this objective.
The majority of these loans were facilitated through non-governmental organisations (NGOs). Farmers accessed loans from banks at a lending rate of 8 per cent, whereas loans acquired through NGOs carried higher rates ranging from 24 to 30 per cent.
Due to the inherent challenges faced by banks in directly reaching farmers at the grass-roots level, they channel loan disbursements through NGOs, which, in turn, disburse the funds at elevated interest rates.
To provide farmers with loans at more favourable rates, the regulator has instructed banks to disburse a minimum of 50 per cent of their total loans through their own channels.

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