Banks, MFIs asked to bring down interest rate on agro loan
Wednesday, 18 November 2009
FE Report
Bangladesh Bank governor Dr. Atiur Rahman Tuesday asked the banks and microfinance institutions (MFIs) to bring down the interest rate on agro loan for the rural sharecroppers to a minimum 10 per cent if possible.
Hailing the recent trend in the financial sector to provide loans to the farmers at a decreased rate, he has urged the banks to be further 'flexible' in lending to the small and marginal farmers.
"Although, it is highly appreciable that the interest rate on agro loan has been brought down to even 13 per cent over the time; in case of sharecroppers, the interest rate could be as low as 10 per cent", BB Governor said in the city.
His views came at the closing ceremony of a syndicated agricultural financing for BURO Bangladesh held at a city hotel Tuesday.
Addressing the risk factor involved in lending to marginal farmers, Atiur recommended the formation of 'social collateral' and the adoption of 'revolving loan policy' in financing the sharecroppers.
"Sharecroppers, may be eight to 10 in number, can come together in forming a 'social collateral' so that they can minimize the risk through sharing it between themselves in case of ones default", the Governor said.
"Also the banks can adopt a revolving loan policy in financing the marginal farmers, so that they can revolve the loan provided to sharecroppers in a year to year basis to play down the risk", he added.
Atiur informed that the central bank is currently experimenting the social collateral method in collaboration with BRAC, which he said that BURO and other NGOs can replicate.
Hailing the closing of the syndicated financing arranged for BURO, the central bank governor termed the move as significant as a multinational bank has come forward in leading the other banks in financing an NGO for the agricultural sector.
He also asked the arrangers to replicate the same model in financing the Small and Medium Entrepreneurs (SMEs) as well; adding that financing of the SMEs along with the farmers would be the priority agenda in the government's upcoming Five Years Plan.
Global financial giant Citibank N A has joined hands with 13 leading local banks in providing what has been termed as the country's first ever syndicated agricultural term financing facility- an amount of Tk. 1.50 billion in five years' term to BURO.
"A total of 150,000 farmers coming from 393 upazillas in 51 districts would receive the loan as part of this financing programme" BURO Bangladesh Executive Director Zakir Hossain said.
"In the near future, we would like to arrange the same type of syndicated loan for the NGOs in financing the SMEs", Citi Country Officer Mamun Rashid said.
Besides Citi, other participating lenders include Agrani Bank Limited, Citibank, N.A., Dutch-Bangla Bank Limited, Eastern Bank Limited, Janata Bank Limited, Mutual Trust Bank Limited, Prime Bank Limited, Pubali Bank Limited, Sonali Bank Limited, Southeast Bank Limited, Standard Bank Limited, The City Bank Limited and United Commercial Bank Limited.
Janata Bank Managing Director S M Aminur Rahman and Pubali Bank Managing Director Helal Ahmed Chowdhury among others also spoke on the occasion.
Bangladesh Bank governor Dr. Atiur Rahman Tuesday asked the banks and microfinance institutions (MFIs) to bring down the interest rate on agro loan for the rural sharecroppers to a minimum 10 per cent if possible.
Hailing the recent trend in the financial sector to provide loans to the farmers at a decreased rate, he has urged the banks to be further 'flexible' in lending to the small and marginal farmers.
"Although, it is highly appreciable that the interest rate on agro loan has been brought down to even 13 per cent over the time; in case of sharecroppers, the interest rate could be as low as 10 per cent", BB Governor said in the city.
His views came at the closing ceremony of a syndicated agricultural financing for BURO Bangladesh held at a city hotel Tuesday.
Addressing the risk factor involved in lending to marginal farmers, Atiur recommended the formation of 'social collateral' and the adoption of 'revolving loan policy' in financing the sharecroppers.
"Sharecroppers, may be eight to 10 in number, can come together in forming a 'social collateral' so that they can minimize the risk through sharing it between themselves in case of ones default", the Governor said.
"Also the banks can adopt a revolving loan policy in financing the marginal farmers, so that they can revolve the loan provided to sharecroppers in a year to year basis to play down the risk", he added.
Atiur informed that the central bank is currently experimenting the social collateral method in collaboration with BRAC, which he said that BURO and other NGOs can replicate.
Hailing the closing of the syndicated financing arranged for BURO, the central bank governor termed the move as significant as a multinational bank has come forward in leading the other banks in financing an NGO for the agricultural sector.
He also asked the arrangers to replicate the same model in financing the Small and Medium Entrepreneurs (SMEs) as well; adding that financing of the SMEs along with the farmers would be the priority agenda in the government's upcoming Five Years Plan.
Global financial giant Citibank N A has joined hands with 13 leading local banks in providing what has been termed as the country's first ever syndicated agricultural term financing facility- an amount of Tk. 1.50 billion in five years' term to BURO.
"A total of 150,000 farmers coming from 393 upazillas in 51 districts would receive the loan as part of this financing programme" BURO Bangladesh Executive Director Zakir Hossain said.
"In the near future, we would like to arrange the same type of syndicated loan for the NGOs in financing the SMEs", Citi Country Officer Mamun Rashid said.
Besides Citi, other participating lenders include Agrani Bank Limited, Citibank, N.A., Dutch-Bangla Bank Limited, Eastern Bank Limited, Janata Bank Limited, Mutual Trust Bank Limited, Prime Bank Limited, Pubali Bank Limited, Sonali Bank Limited, Southeast Bank Limited, Standard Bank Limited, The City Bank Limited and United Commercial Bank Limited.
Janata Bank Managing Director S M Aminur Rahman and Pubali Bank Managing Director Helal Ahmed Chowdhury among others also spoke on the occasion.