Collateral-free loan at an interest rate as low as 4%. Just show your national ID and take the money home.
The offer sounds lucrative. But for farmers it is hard to believe as their past experience with banks is frightening. Many farmers are scared of banks and not aware of any such loan schemes for them. For emergency fund needs, most of them rush to NGOs, who charge higher but make the money available at home without hassle and paperwork.
As the country's largest rice crop season sets in, farmers are in need of cash.
The central bank announced a Tk5,000 crore refinancing scheme at 4% on November 17 for farm loans ahead of Boro season to help farmers meet their cash needs amid growing input costs. But the response from farmers so far remains poor, according to reports from several districts.
To break the persisting bank phobia among small-scale rural farmers, the agriculture ministry initiated a move engaging local administration to make loan accessible to intended farmers. Massive campaigns to inform farmers about the simplified loan schemes and opening of kiosks outside banks for targeted groups of farmers are in the plans.
Deputy commissioners of districts have been tasked with taking care of the process.
Md Sayedul Islam, secretary, Ministry of Agriculture, told The Business Standard, "Since we are stressing increasing production, this 4% interest loan is to make investment easier. We held meetings with the banks to ensure the loan process is easy.
"First, we will give a district-wise list of farmers to the district administrators. Here, the interested parties are asked to process loans by setting up kiosks at area-wise open places outside the banks. Farmers will get collateral-free loans of up to Tk2 lakh by only showing their NID cards."
Thousands of farmers across the country, reluctant to approach banks for loans, turn to NGOs that loan them high interest loans.
Unlike banks, the NGOs often show up at the farmers' doorsteps, making the entire process much easier and faster. The NGOs also call on the farmers to collect instalments, removing another hassle.
Sources at the Ministry of Agriculture said banks had been instructed to provide loans by setting up easily-accessible desks during the Boro production – with the Boro target this year set at 21 million tonnes, a million higher than what was produced last year.
Farmers will get a loan at 4% interest for poultry, milk production, paddy, vegetables, fruits and flowers.
Farmers can avail of the loan by showing their National Identity cards and no need of collateral.
Former MD of Bangladesh Krishi Bank Md Ali Hossain Prodhania told TBS that banks should go beyond the target amount fixed by the central bank as farmers need more money.
He urged them to target farmers who do not usually take loans from banks.
"Otherwise credit cannot be ensured for genuine farmers. In order to do this, the top management of state-owned banks, including the Bangladesh Krishi Bank, Rajshahi Agricultural Development Bank, needs to monitor the agricultural credit distribution."
Ali Hossain said the government should also simplify the policy of granting and disbursing agricultural loans. Initiatives should be taken so that banks can distribute microcredit at low-interest rates in rural areas.
Former Bangladesh Bank governor Dr Salehuddin Ahmed said farmers are also not interested in going to the bank due to the requirement of several documents like national identity card, land deed, land etc.
"Farmers require money for planting, irrigation and buying fertiliser. They don't want to go to the bank because they don't get money when they need it."
Sometimes, the farmer does not get the full amount of money sanctioned by the bank due to cuts taken by the middleman linked with the bankers.
These problems need to be addressed to ensure proper outcome from the agriculture loan and refinancing scheme announced by the Bangladesh Bank.
Farmers need money before the biggest production season
Many farmers in different regions of the country, including Dinajpur, Bogura, Rangpur, Rajshahi, Kurigram, Mymensingh and Comilla, said they had yet to hear about the 4% interest loans.
But with the country's biggest production season set to start, farmers will require money.
Over the past season, the loss of crops due to landslides, cyclones and droughts has also left many growers cash-strapped.
Krishna, a farmer of Burail union, Nandigram, Bogura, has cultivated 12 bigha of land. He said for each bigha, Tk12,000-13,000 is spent on fertiliser, water, pesticides and workers.
"Every year, I borrow from NGOs. If you go to the bank, you have to get a broker and pay bribes."
Regarding the 4% interest loan, he said, "There is no use in applying for those. If we go to the bank, we will be turned away. They will not give loans to ordinary farmers like me."
Agricultural economists say the banks' reluctance to distribute loans to genuine farmers has plagued the system for long.
No special campaign or programme has been taken to eliminate this problem.
Agricultural economist Dr Md Jahangir Alam Khan told TBS, "In order to increase production, we have to take initiatives to simplify the system along with a massive campaign about the low cost loans. If necessary, this loan can be given as a six-month scheme, so that the money can be repaid after harvesting."
He said, "If there is a collaboration of NGOs through PKSF instead of relying only on the bank, it will be successful."
Official data shows boro output kept its growth momentum as farmers had proved their worth by continuing food production under difficult circumstances throughout the Covid pandemic that kept people of most other professions indoors.
At the very beginning of the coronavirus outbreak in early 2020, Prime Minister Sheikh Hasina had announced a Tk5,000 crore stimulus loan for farmers apart from Tk100 crore in seed support and Tk100 crore in farm mechanisation to help farmers continue farming activities.
On several occasions in recent months, she had urged that no farmland lies uncultivated.
But high labour wage, increased price of diesel used in irrigation and rising costs of fertilisers remain key concerns for farmers, with agro-economists calling for cash support to help farmers cover the farming cost hikes.
Not alone the paddy farming, farmers are badly in need of money for cultivating pulses and other crops due to damage caused by floods and rains. A farmer in a Pabna village said he had planted black legume twice and every time it was damaged by rains. He is now worrying about meeting expenses for the next paddy crop.
Farmers' loans around the world
As the Covid and the Ukraine war, coupled with climate extremes and rising input costs, have pushed the world into its largest food crisis in modern history, countries are loosening their purse strings for farmers to ensure food security.
Governments across Asia, Europe and America are expanding their farm credit programmes to provide a crucial lifeline for farmers who cannot access bank loans to continue farming.
Neighbouring India, one of the largest food grain producers in the world, unveiled a generous scheme to lend farmers short-term agriculture loans of up to Rs3 lakh at 7% interest. Farmers will also get a 3% discount on timely repayment.
Farmers in the European Union will get one-off cash support of up to €15,000 per farm to offset considerable increases in energy, fertiliser and animal feed prices as the EU authorities fear for the survival of many small-scale farmers.
This €1.5 billion scheme is the latest in a series of supports under its standard agriculture policy aimed at helping farmers grow food and care for their land and families. The European Investment Bank joined hands with UN's International Fund for Agricultural
Development (IFAD) to create a €500 million fund to help small scale rural farmers stay afloat and cope with climate change, high prices of food, fertilisers and fuels.
The US government announced a unique scheme for farmers unable to repay loans due to loss caused by Covid, climate adversities and reasons beyond their control.
Borrowers will receive an average of $52,000 in debt relief. The US agriculture department will spend $800 million sending money to banks to clear their dues or pay instalments to avoid bankruptcy or foreclosure in the coming months.
Rajshahi agri bank claims 100% disbursement
Managing Director of Rajshahi Agricultural Development Bank Zahidul Haque said the disbursement target was Tk3,250 crore in Rajshahi and Rangpur regions this year.
Out of this, agricultural credit for direct crop production is Tk1,900 crore.
He claimed 100% of agricultural loans had been distributed in these locations.
Dr Salehuddin Ahmed, former governor of the Bangladesh Bank, said targets regarding disbursement of loans in the agriculture sector were never met primarily due to lack of interest from banks and bankers.
Bankers tend to find potential borrowers from industrialists, large business entities, and even traders, he said, adding that targets can be fulfilled by disbursing loans to a few big customers.
"Bankers also get additional benefits from borrowers. On the other hand, the small borrowers are considered a liability."
He said the central bank sets a target each year but it does not ensure action against banks who fail to meet it.
Our Bogura correspondent Khorshed Alam and Rajshahi correspondent Sana Ullah Sanu contributed to this report.