AB Bank targets lending to 70,000 farmers this year

Tarique Afzal started his banking career as a young professional in the late 1980s in London, UK. Later, he served in TD Bank (Canada), ANZ Grindlays, and Standard Chartered Bank in Bangladesh. He also held senior positions in Bank Alfalah and Brac Bank.

In an exclusive interview with The Business Standard, he shared the reasons behind AB Bank's emphasis on agricultural loans, smart cards for farmers and several other issues facing the banking industry.

Private-sector banks are usually interested in corporate lending, but AB Bank has now been emphasising agricultural loans. Why is that the case?

Corporate or large loans have been a need since the very beginning of the banking industry, for industrialisation and infrastructure development. We have also been responding to that need. But now, we should look into whether corporate loans are being disbursed more than the demand. We also need to think about where to stop. If the stop point can be determined correctly at the right time, we can prevent many problems, including bad loans, easily. 

Loans naturally turn bad if they are given to saturated sectors which no longer need investment. Unfortunately, it has happened in some cases for private banks in recent times, causing a rise in classified loans. These banks neglected rules and regulations to invest large amounts, especially in industrialisation.

When I joined AB Bank at the end of 2018, I found similar problems here and started to work on fixing these. I was determined to diversify investments and curb bad loans. As a result, we have progressed consistently. We are now paying regular dividends to shareholders.

We have prioritised agricultural loans considering our economy, which is by and large based on agriculture. And we have gotten positive results. We believe that such diversification will reduce our credit risk as well as bad debts. Besides, it will also help new entrepreneurs grow in the agriculture sector and small industries, increase financial inclusion in remote areas, and create a new customer base.

You also get funds from the central bank's refinance schemes. How many farmers have you lent to so far and how many is your target?

We provided agricultural loans to 13,000 people in 12 districts in the last three months. Farmers got Tk50,000-100,000 each, depending on their land, cultivation and needs. This year, we plan to give loans to about 60,000-70,000 farmers. We term these loans as 'farmers' fair dues'. They were neglected or underserved earlier.

We have had great cooperation with the agriculture ministry while working in remote areas. The local offices of the ministry provided us with details of farmers, who we wished to lend. Farmers are offered smart accounts and smart cards during loan distribution.

How has the response been to the smart card?

Our communication system has developed greatly thanks to the Digital Bangladesh initiatives and we have taken advantage of it. We observed that all men and women in our villages now can use smartphones. They are already used to avail services of health, education and others through smartphones. Our bank also has been providing training on how to use smart cards.

We lent to farmers against their Agriculture Cards issued by the Department of Agricultural Extension and NID cards only. Farmers are allowed to withdraw cash from ATM booths of any bank without any charge. They can repay the loans with interest through bKash or the cards.

Can you elaborate on your repayment policy for agricultural loans?

Farmers do not have any monthly pressure to pay the loans; they can repay in one go. We have kept the flexibility considering their convenience. They produce different things in each season and use money in cycles. So, they have been allowed to repay the loans when the annual loan cycle is complete.

We also relaxed conditions in the loans keeping in mind that farmers can be any problem at any time due to heavy rains or natural calamities.

We have four objectives behind our agricultural loan initiative and they are helping the government make Bangladesh self-reliant, promoting the agriculture economy, facilitating easy-term finance for farmers and ensuring proper utilisation of the loans.

Proper utilisation of funds is the crucial factor and it needs further attention. We will consider further relaxation or delays in repayment if funds are utilised properly. Our aim is to improve the quality of farmers' lives.  We have opened sub-branches in different areas, which will monitor loan utilisation. We also expect cooperation from the agriculture department offices.

AB Bank went through a critical period before 2019. How have you made a quick recovery from the situation?

I think the first reason is goodwill. With sincerity and goodwill, it is possible to recover defaulted loans in phases because we have all the necessary laws. But the application of laws is important.

We have filed a number of criminal cases against defaulting customers while many have been arrested and some faced imprisonment. Thanks to these, many wilful defaulters started to realise that the situation has changed, we believe.

Tell us about your business plan for the next five years.

In the next few years, we will continue to work on bad loan recovery and good governance so that we don't have to look back.

Last year, I went to courts in Chattogram, Sylhet, Rajshahi and wherever we have pending cases and talked to legal advisors for an expedited legal process. If the cases are disposed of or the defendants are declared convicted, we will get some amounts of money immediately.

Our latest policy is to focus on small loans and avoid big ones. If we stress large debts, we will have a capital shortage and liquidity crisis. In contrast, small loans will reduce our risk level. And in the case of refinance, there is no problem. So, in the next few years, we will strongly emphasise agricultural as well as small loans and their recovery. We also work to increase new customers for sustainable income and sustainable growth. We are hopeful that we will improve to a significant level within the next two years.