Foreign banks foray into farm loan

Md Mazadul Hoque Foreign banks operating in Bangladesh have moved into the farm sector investment as part of the central bank requirement to boost agricultural credits, bankers said. The Bangladesh Bank (BB) has directed foreign banks to set aside at least 3.0 per cent of their credit portfolios for the agriculture sector, although they have virtually no presence in rural areas. Commercial Bank of Ceylon, a Sri Lankan lender, has focused its attention to the farm sector in line with the central bank's agenda of making sure that Bangladesh's millions of farmers have access to bank credits. Atahar Uddin Ahmed, Head of credit administration of the bank, said his bank is trying to reach out to rural farmers through microfinance institutions (MFIs). "We are disbursing such loans through two of the country's largest MFIs--TMSS and BRAC whose performance has proved better," he told the FE. He, however, admitted as his bank has no branches at the district level, it is almost impossible to monitor the progress whether loan recipients invest in the sector. Mr Atahar did not disclose the actual cumulative investment of his bank, but said the disbursement began since 2007. He noted every year the amount of disbursement ranges from Tk 500 to Tk 1,000 million but the amount may be increased depending on the demand in future. Woori Bank, the second largest bank in Korea, launched agri lending in the last fiscal and a high official of the bank's credit division said his bank is committed to the cause of farmers. "Like other foreign banks, we are also relying on NGOs to disburse such credits," he said. "But we prefer smaller NGOs to bigger ones given the fact that transparency is better in case of small players." He said his bank's target is to scale up the annual disbursement to Tk 300 million, though the central bank's requirement is only 3.0 per cent of the total portfolio of a bank. If the bank's branches can be expanded, the disbursement would be higher and it would be easier to supervise and monitor the use of loans, the official said. Habib Bank Ltd, a Pakistani bank, has drawn up an ambitious plan to ramp up lending in poultry and fisheries sectors. "We're planning to lend out to the hatchery sector as soon as possible," he said. Iftekhar Hasan, a public affairs manager at HSBC, told the FE the Hong Kong-based bank has been disbursing agri credits for a few years but plans to boost such lending in future. Mr Hasan said HSBC disburses agri credit in two ways: for agri finished products manufacturers and farmers. "We have financed four to five export-oriented agri projects so that the country can earn foreign exchanges," he said. The bank is continuing its disbursement through three to four leading NGOs, which have nationwide network to monitor how credit is spent, Mr Hasan said. "We emphasise on export-oriented sectors in the country for loans disbursement from which the country gets more benefits," he added.