Farmers are more bankable than traditional belief

Banks and financial institutions have started diverting their funds — also due to the central bank’s mandatory diktat — to the agriculture sector challenging the traditional belief that poor and illiterate farmers are not bankable.
“Farmers are bankable clientèle contrary to traditional belief,” said Everest Bank’s chief executive P K Mohapatra. The bank has started a specialised branch ‘Krishi Udhyan Bikas Sakha’, in Rajbiraj, Saptari targeting agriculture.
“Contrary to the preconceived notion that they are not bankable, our experience has that there is less than five per cent default rate,” he said, adding that due to social stigma farmers are honest clients, and as soon as they get the harvest, they rush to the banks to pay their loans. “Loan default in rural areas is lower than in urban areas.”
The central bank has directed banks to lend 10 per cent of their total loan portfolio to the agriculture and hydropower sectors to promote agriculture as it contributes 33 per cent to the gross domestic product.
Agriculture also employs most of the population in the rural parts of the hills and Terai in the country. But lack of commercialisation of the agriculture sector has made it unattractive and the rural youth are fleeing the country in search of greener pastures to the Gulf and Malaysia.
But, a forward and backward chain — from seed to irrigation to market place where they can sell the agriculture produce — has to be developed to commercialise agriculture and boost agro enterprises, and also to make the central bank’s directed lending a success.
“Like other lendings, directed lending has its pros and cons,” said Mohapatra, who thinks that Rajbiraj is one of the best places to lend to farmers.
“There is enough irrigation facility, which is key to timely plantation,” he said, adding that the bank is also planning to enter into an agreement with some business houses to develop a market chain soon to ensure a market for farmers.
After the agriculture-focused Rajbiraj branch’s success, the bank is planning to replicate it in other districts too, though the other 46 branches of Everest Bank are also lending to the agriculture sector as usual.
“By the mid-fiscal year, we might be able to lend around three to 3.5 per cent in agriculture,” opined the chief executive, who believes that with the regulatory system’s support, directed lending could bring in benefits but after a certain period of time.