Agricultural loan disbursement under the allied stimulus package of Tk 5,000 crore has not made a satisfactory progress as different banks are lagging behind to meet the disbursement deadline.

The delay is attributed mainly to the banks’ lack of capacity and efficiency to reach such loans to rural farmers.

The government stimulus package was launched in the form of a refinance scheme in April, 2020 after the outbreak of Covid-19 in the country in March, 2020. Bangladesh Bank asked banks to disburse the funds by September 30, 2020. But most of the banks failed to do so, forcing the central bank to extend the timeframe twice.

Of the 43 banks, 17 achieved less than 30 per cent of their respective loan disbursement target set by the banking regulator till January 15, 2021.

IFIC, Trust, First Security, Standard, Southeast, Mutual Trust, Jamuna, NRB Global, BASIC, Dhaka, Bangladesh Commerce, Al-Arafah, Social Islami and South Bangla Agriculture and Commerce were among these 17 banks.   

"The central banks are closely monitoring the disbursement of funds from the package and banks which have failed to achieve the target have been asked to expedite the disbursement," said the central bank's chief spokesperson Md. Sirajul Islam.

He said if these banks fail to improve the disbursement capacity, their undisbursed amount will be handed over to banks that have fulfilled the lending target.

Talking to the Bangladesh Post, former governor of Bangladesh Bank Dr Atiur Rahman said private banks do not have the capacity to reach loans to farmers in rural areas and most of the banks do not have branches there. He said agent banking window of banks could be a solution but banks are yet to set up such facility all over the country.

"The central bank needs to keep the banks under its close monitoring for quick and proper disbursement of funds to farmers from the stimulus package. Some banks can fail to reach the loans to farmers but such banks should be given proper guideline so that they can achieve disbursement target," said Dr Salehuddin Ahmed, another former governor of the central bank.                    

According to the central bank, Bangladesh Krishi Bank (BKB) is the top performer in terms of loan disbursement under the package as it has taken special measures to reach the credit to farmers across the country.

The BKB, a specialised bank for the farm sector, have been able to distribute over Tk 1,570 crore till January 15, 2021 against its target of Tk 1,699 crore.

"We have been able to distribute loans properly and in time because all branch managers have been given proper instruction and guidance to speed up the loan disbursement," said BKB's managing director Md Ali Hossain Prodhania.

The period for the loans is 18 months, including a grace period of six months at both the banks' and clients' ends. Banks will borrow from the refinancing scheme at 1 per cent interest rate from the central bank and lend at 4 per cent interest to borrowers.

The low-cost loan covers five agricultural sub-sectors-fruits and flowers, fisheries, poultry, dairy and livestock and the businesses selling agricultural commodities.

On December 29, 2020, the central bank asked banks to fulfil their disbursement target by March 31, 2020. But the banks have so far been able to disburse Tk 3,500 crore, or around 68 per cent of the package. Around 144,959 farmers have availed of the fund from the package, according to the BB.

The central bank has reviewed the overall disbursement situation and asked banks to expedite the distribution of farm loans in line with the government instructions.

Economists and bankers attributed the failure of banks in meeting the target to their poor capacity and efficiency, saying that most of the private commercial banks do not have branch in rural areas across the country like state-owned banks to reach the farm loan to farmers timely.        

According to the BB, a total of 43 banks signed participation agreements with the central bank for disbursement of loans from the stimulus package to support the agriculture sector that has been affected like other sectors by Covid-19 pandemic.

When contacted the officials concerned of Al-Arafah and Jamuna banks, the two poor performing banks, they refrained from making any comments, saying, "Contact later . . . our officials of concerned departments are not available right now."