Agricultural credit, the key to agricultural success
From today’s article with statistics provided by the Bangladesh Bank. According to statistics, in six months from July to December 2020, banks granted loans totaling 12,077 crore Tk (1,420 million USD) to farmers, collected 14,091 crore Tk (1,657 million USD) from farmers at the same time . This means that the banks collected 22.53% more agricultural loans compared to the total disbursement. Although there was a special instruction from the Bangladesh Bank regarding the payment of the installments, the farmers continued to repay their loan installments. It can be said that our farmers have been at the forefront and have worked hard for a sustainable economy during the coronavirus pandemic. In 2020, Bangladesh Krishi Bank distributed agricultural loans worth Tk 4,636 crore (USD 545 million) and despite the spread of COVID-19, the bank was able to recover Tk 4,000 crore (USD 474 million). ) this year. Real farmers are not failing and they have proven it even during the pandemic. Whenever they don’t pay off a small loan, law enforcement is always there to stop them, but the big fish manage to escape through the loopholes in the law.
It is difficult for a farmer to get a loan because we have prolonged neglect of farmers and the agricultural sector. According to a 2019 study by the International Food Policy Research Institute (IFPRI), farmers in Bangladesh typically borrow more than 81% of loans from a variety of private sources, including NGOs, relatives, private banks and pawn shops. The interest rate on these loans is 19 to 63 percent while the interest rate is nine percent at Krishi Bank. But for some reason, only 6% of the total loan amount comes from Krishi Bank. The IFPRI survey found that 36.4 percent of total loans were borrowed from NGOs, where the farmer must pay interest of more than 20 percent. According to IFPRI, 19 percent of farmers take out loans from relatives. 15 percent of the landowner, 11.4 percent of loan sharks and 3.6 percent of various associations and cooperatives. Farmers receive the largest share of the loan from Krishi Bank, around 15%. Large, medium and small farmers collectively receive 36 percent of the total loan, while marginal farmers receive about 5 percent. The total loan percentage that all farmers get is 36 percent. The sharecroppers, the farmers who lease the land of others, do not get this loan. As a result, they have to rely on loans from other sources, including NGOs.
Small NGOs and associations began to form in neighborhoods and upazilas from the 80s to the early 90s of the last century. Along with other development activities, these institutions have launched a microcredit program. Institutions thrive primarily on interest earned on loans. But there is no such change in the farmer that I have witnessed. The farmer falls into the debt trap and sometimes carries the burden of extended loans that he takes out from local NGOs and pawn shops. Farmer Rafiqul Islam from Natore, during one of the open-air discussions between farmers and policymakers, popularly known as “Krishi Budget Krishoker Budget” (Farmers’ Voices in the Budget, broadcast on Channel I), a said he had never seen a politician become poor while playing politics, but farmers are not well off in their profession, which is farming. “We have no capital, nobody thinks about our market, nobody talks about us,” Rafiqul said angrily. Such anger does not only come from Rafiqul, but almost all farmers suffer the same agony. More importantly, the loan sharks have grown their business by capitalizing on the poor condition of the farmers and they never want them out of this vicious cycle of borrowing money from the rich and powerful in the region.
Usually, the prices of fruits and crops are not very good during the season. So if the crop is saved, the farmer will likely get a higher price during the off-season. After harvest, a farmer has to sell his crop for two reasons. Small and medium-sized farmers have no arrangement for storing crops. After taking out a high interest loan from a lender, it becomes mandatory to repay the loan on time. Usually, the farmer has to sell the crop from the land to repay the loan. Otherwise, he will not get a loan from the loan shark for the next harvest. According to a recent research report from the Bangladesh Rice Research Institute (BRRI), farmers must sell 52 percent of their surplus paddy within one month of the start of the season. In one to two months 25 percent of the paddy must be sold, in two to three months 18 percent and in four months or more 5 percent. However, if the farmer had three to four months to repay the loan and there was a system to save the crop, he could have benefited greatly. Once upon a time in this country, farmers obtained loans by storing grain in food warehouses. This great project called “Grain Storage Loan Project” was stopped by the muscle power of the pawn shops.
Another problem with loans is the organization of loans for landless farmers and sharecroppers. According to the Bangladesh Bureau of Statistics (BBS), 19 percent of the country’s 35.5 million farm households are sharecroppers. According to this calculation, the number of sharecropping families in the country is over 65 lakh (6.5 million). There are approximately 23 23,270 (2.3 million) landless farming families in Bangladesh and these families are directly engaged in agriculture, renting land from others. Under current government policy on agricultural loans, the owner of land up to five acres will get a maximum loan of 2.5 lakh Tk ($ 2,964) and have to mortgage their land. Those who do not have land will also get this loan, but in this case they will have to hand over the lease contract. But the reality is different. Last year, when the government announced a stimulus package for farmers, given the coronavirus outbreak, the Bangladesh Bank pledged to provide loans at an interest rate of 4% Tk. However, many sharecroppers called me and told me that they had not obtained any loans. They had leased the land but did not have a contract, since the landowner usually does not provide the agreement. This is because if the land is allocated through a written agreement, the owner must pay a certain amount to the government.
I can see a silver lining in the midst of the frustration about the loans. I have always been an optimistic person. I believe that one day everything will be in favor of farmers. In this corona crisis, many of us have come to realize the importance of agriculture. Either way, I was talking about hope. Last year I heard that Rupali Bank was giving interest free loans to farmers for growing tomatoes. I learned about their program with great interest. They granted a loan of 50,000 Tk to 500 tomato growers in Natore as part of a pilot project. I have spoken on several occasions of such a program. In my ‘Krishi Budget Krishoker Budget’ program, many farmers shared their bitter experiences of getting or not getting loans.
Some have also criticized the NGO debt trap. One day, I had a long conversation with Rezvi Newaz, Channel i News special correspondent. I told him that in any program on agriculture, the farmer’s side should be considered the most. The farmer must ensure that he gets the right price for his products. The development of the agricultural sector and farmers will be the key to the sustainable development of Bangladesh. I think the real farmer has the right to get a loan at 4 percent interest without any further conditions. While, we see the farmers having to take out high interest loans from various NGOs or intermediaries. Where manufacturers get loans at an interest rate of 9 to 15 percent, small farmers have to pay an interest rate above 20 percent. Considering the number of defaults, write-offs, corruption and irregularities in the banking sector, the government may grant interest-free loans of Tk 15,000 crore to Tk 20,000 crore (USD 1,764-2,353 million) without interest. .
Our country is entering the era of agricultural industrialization. Manufacturers are investing in agriculture, and agricultural technology is changing and spreading rapidly. Small and medium-sized farmers must survive, otherwise many will leave the profession and the number of unemployed will increase. Small and micro businesses should have a chance to succeed. Agricultural loans should be facilitated and accessible. Public banks specializing in agriculture should come forward with more seriousness.