FARMERS who receive agricultural loans should be included in the government’s food procurement drive on priority basis, a study report recommended. The smallholder farmers, who could get loan under the government’s agricultural credit disbursement facility, should have access to sell rice, paddy and wheat to the food directorate, it said.
The study report was released at a workshop on “Access to Financial Services for Smallholder Farmers,” organised by Helvetas Bangladesh jointly with the ICCO Cooperation, Gana Unnayan Kendra at the BRAC Center Inn. The study was conducted under a project “Strategic Partnership for Convening and Convincing (SPCC)” of Helvetas Swiss Intercoope-ration, aiming to empower smallholder farmers through their financial inclusion.
Despite the fact that the policy initiatives of Bangladesh Bank have been framed for adequate financing to agriculture with focus on providing credit to women, marginal and tenant farmers but still a large segment of poor farm households are excluded from institutional financing as they do not have enough assets to give as collateral. As a result, they have to borrow money from informal sources at an exorbitant rate.
As a regulatory body of the banking sector, Bangladesh Bank has issued numerous guidelines with a view to widening the coverage of financial services. But participating banks cannot strictly follow all the rules and guidelines of BB due to several logical reasons especially for maintaining the security and the interest of the banks, as per the banks statement.
This is nothing new. Microcredit under Grameen Bank flourished because banks were unwilling to lend money to the poorest and most economically disadvantaged citizens of the country. That’s why Professor Yunus described banks as engines of social inequity which made the rich richer and the poor poorer.
Despite all of this Grameen Bank was successful even because it charged high rates of 25-30 percent because the alternative —interest rates of 600-1200 percent, were charged to farmers and other agricultural actors by the local money lending institutions. So the question is if Grameen Bank can do it, along with other micro-lenders like BRAC, then why cant banks?
The answer is simple — banks don’t want to bother with the deprived farmers because it will hurt their bottom line — the costs of managing thousands of small loans will result in a reduction of the banks bottom line as they would have to open more branches and hire more people for marginal returns on their investment.
But this idea — while based on economic principles of profit and loss, must be thrown out to help our farmers as they bear the pain of making us self sufficient in food production. So the ordinary principles of profit and loss must be therefore waived from this equation. To help the nation the banks should think of making marginal profits.
