NEWS reports said NGOs and other microfinance institutions (MFIs) are taking double interest on farm loan when farmers were supposed to get the low cost loans. As per Bangladesh Bank’s farm loan policy, commercial banks are supposed to give loans to farmers at an interest rate of 11 percent. But the NGOs and MFIs charge more than 27 percent interest on the loans they give to farmers. Most strikingly, the NGOs and MFIs are taking the fund from the commercial banks at half of their rates and they are jointly exploiting the farmers. In fact, the remaining 16 percent interest is part of a double business on farm loan; making farmers victims of deceit breaking the Bangladesh Bank’s laid out guidelines. To many, it is outright cheating under the very nose of Bangladesh Bank and such other regulatory agencies.
What makes the mismatch here is that all commercial banks are required to disburse farm loans as certain percentage of their total loan portfolios. What many of them do is that instead of directly advancing loans to farmers they put the fund to the NGOs and MFIs to avoid cost of fund management and recovery troubles. Most interesting is that in many cases; the commercial banks get part of the agricultural loan from the central bank at nominal cost, say upto 5 percent interest. In fact, the central bank lends the fund at low cost that the commercial banks again lend it to NGOs and MFIs at certain higher cost. These organizations then charge the farmers up to 27 percent interest making farmers highly unprotected in our rural credit system.
As it appears the issue was discussed at DCs conference in recent past and the ambiguity of farm loan policy surfaced when the central bank held the view that the operation of NGOs and MFIs is not under their jurisdiction. As it turns out banks and financial institutions are highly vulnerable under this government when powerful people swindled almost all state-owned banks. It appears farmers are also ruthlessly exploited now that can’t go unchecked. It is not our concern to see NGOs and MFIs fall under whose jurisdiction; we would like to see that their exploitation of farm loans must stop.
