Introduction to Agriculture Sector
The agriculture sector plays a vital role in the country’s economy, contributing around 12 per cent of the country’s gross domestic product (GDP). However, this figure can be misleading, as around 45 per cent of the nation’s workforce is directly involved in the sector. This underscores the impact of agriculture on the job market and the economy. Ensuring food security also remains highly dependent on substantial farm output.
Importance of Farm Credit
The central bank has recently unveiled the Agricultural and Rural Credit Policies and Programmes for the current fiscal year, setting a target of Tk 390 billion for agricultural and rural credit distribution. This target is 2.63 per cent more than last fiscal year’s target. However, the actual amount of disbursed loans stood at 373.26 billion, which is a matter of concern. The farm loan disbursement fell below the target after three years of overshooting the annual targets. This is particularly concerning, as the agro-based rural economy needs sufficient support to boost economic activities.
Easing Loan Application Procedures
The latest farm credit policy aims to ease loan application procedures, disburse credit through agent banking activities, and use the MFI/NGO linkage by banks that do not have adequate branches or sub-branches in rural areas. This is a step in the right direction, as commercial banks in the country often prioritize other sectors over agriculture. The central bank governor has noted that farm and rural credit is still a low priority area for commercial banks, with less than 3 per cent of total bank financing going to agriculture.
Role of Specialized Banks
Two specialized banks, BKB and RAKUB, and six state-owned commercial banks play a critical role in disbursing farm credit. These eight banks disburse around 36 per cent of the total credit, while 42 private commercial banks disburse 62 per cent. There is scope to increase the share of private commercial banks to boost farm credit. At present, 60 per cent of the total farm credit goes to the crop sub-sector, followed by 15 per cent to livestock and 13 per cent to fisheries.
Need for Climate-Resilient Seeds and Technologies
To meet the growing demand for staple food, efficient farm production is necessary. However, without climate-resilient seeds and advanced technologies, it is challenging to enhance farm output. The agriculture sector is now more diversified, with many young entrepreneurs emerging with small-scale operations. They need bank financing to move ahead with their farm projects. Farm-centric cottage, small and medium enterprises are also growing, reflecting the diversification of the sector. These enterprises require easy and efficient financing, which private commercial banks can provide.
Conclusion
In conclusion, the central bank’s push to enhance disbursement of farm credit is a move in the right direction. However, refinancing for farm credit is not the responsibility of the central bank alone, and the government should also provide budget support. This will help increase the volume of farm credit, ensuring that the agriculture sector receives the support it needs to boost economic activities and ensure food security. By increasing farm credit and providing easy access to financing, the country can enhance its farm output, reduce its reliance on imports, and ensure a more stable food supply.
