BB raises farm loan disbursement target for FY24

Bangladesh Bank yesterday gave lenders in the country a higher farm loan disbursement target for fiscal year (FY) 2023-24 in an effort to ensure that farmers get enough funds to invest in increasing food production.

As such, banks will have to collectively provide Tk 35,000 crore as agricultural loans in FY24, up nearly 14 percent year-on-year.

However, growers will be required to pay higher interest on loans this fiscal year as the central bank removed the cap on interest rates and introduced a corridor.

So, borrowers of agricultural credit will need to bear 9.13 percent interest on loans, up from 8 percent the previous year.

Bangladesh Bank issued the new farm loan disbursement target after the lenders gave out Tk 32,829 crore in FY23, which was higher than the target of Tk 30,811 crore the previous year.

Banks will have to collectively provide Tk 35,000 crore as agricultural loans in FY24, up nearly 14 percent year-on-year

AKM Sajedur Rahman Khan, deputy governor of Bangladesh Bank, said if any bank fails to achieve the farm loan disbursement target, then the undisbursed portion of funds will return to the Agriculture Development Common Fund.

Khan yesterday announced the target for FY24 through an event at the Bangladesh Bank headquarters in Dhaka.

As a part of the policy, banks will have to attain half of their farm credit disbursement target through their own network instead of NGOs or micro finance institutions (MFIs).

Previously, banks were required to disburse 30 percent through their own networks, central bank officials said.

In the last fiscal year, banks disbursed Tk 32,829 crore as farm loans, of which Tk 19,526 crore was disbursed through their own networks, they added.

When banks will fully disburse farm loans through their own networks, farmers will be able to avail the credit at 9.13 percent interest.

However, many farmers do not get the benefit as most banks give out farm loans through MFIs that charge much higher interest, bankers said.

As such, the interest rate goes up to 27 percent, they added.

Banks will have to disburse at least 13 percent of the targeted loans to the aquaculture sector and 15 percent to the livestock sector, as per the new agricultural credit programme.

In its policy, the central bank also asked lenders to disburse loans for rooftop gardening, vannamei shrimp, crab and eel farming.

Additionally, the banking regulator asked banks to give new farmers priority when lending.

In the last fiscal year, a total of 36.18 lakh farmers received farm loans and roughly half of them were women, who received a total of Tk 12,752 crore as agricultural loans, according to Bangladesh Bank.