Agri credit disbursal posts 43% growth

Infographic: TBS

Agri loan disbursement surged around 43% in the first two months of the current fiscal year compared to the corresponding period last year, according to the central bank, thanks to pricier fertilisers, seeds, pesticides, irrigation and labour.   

Farming loan disbursement by banks in FY22 was 102% – more than the Tk28,391 crore target, show Bangladesh Bank data. For FY23, the disbursal target was raised to Tk30,911 crore.   

In July and August this year, disbursement by banks met around 12.41% of the annual target by lending away Tk3,837 crore, according to a central bank report. 

In the corresponding two months of last year, the disbursement was Tk2,675 crore, which was 9.42% of the annual target. This means banks disbursed Tk1,162 crore more to farmers in July and August this year compared to the previous year.       

Economists have appreciated the growth, as they asked the central bank to assess it closely. 

The report points out public banks lag in farming loan disbursement. Public banks disbursed 9.25% of the target, as private sector banks disbursed 14.36%. The private lenders also raised their farming loan disbursal target by Tk500 crore this year than FY22. 

The central bank data show nearly all the segments of the farming loan witnessed more disbursal than the previous year. In crop category, the disbursement edged up by 65% to Tk1,818 crore. Other categories such as livestock and poultry, fisheries, irrigation equipment, agri equipment, grain storage and marketing and poverty alleviation also witnessed upticks in credit disbursement.         

The volume of classified loans in the farming sector stood at Tk4,063 crore at the end of August 2021, which was 8.98% of the total loans. 

At the end of August this year, classified loans dropped to Tk4,044 crore, which is 8.05% of the total loans, owing to some central bank measures.      

Loan recovery in the first two months of FY23 was Tk4,123 crore – up from Tk3,369 crore in July-August of FY22.  

For short term agri loans, the Bangladesh Bank has offered loan rescheduling without any down payment for three years. The central bank notes the special facility will help speed up productivity and counteract biting inflation.     

"Farmers had to rely heavily on irrigation due to low rainfall, leading to spiked production costs. From this perspective, the growth is certainly very positive," Towfiqul Islam Khan, senior research fellow of the Center for Policy Dialogue (CPD), told The Business Standard.

He called for central bank monitoring to identify the areas where the disbursements were high and the causes that drove up the bank borrowing.