Credit extension remains lowYouths have failed to get enough loans under the government’s “Agriculture Loan for the Youth” programme introduced last fiscal year to encourage youths to engage in commercial farming.
Youths have failed to get enough loans under the government’s “Agriculture Loan for the Youth” programme introduced last fiscal year to encourage youths to engage in commercial farming.
Under the programme, the youths get the loan at just 6 percent interest rate. The government has subsidised the interest by 4 percentage points. The actual interest rate is 10 percent.
According to the Nepal Rastra Bank (NRB), of Rs500 million allocated for the interest subsidy, just Rs18 million has been distributed so far. Commercial banks extended Rs1.16 billion against the agriculture loan portfolio of Rs67 billion as of mid-February this year.
Terming the progress under the programme disappointing, the Parliamentary Agriculture and Water Resource Committee on Sunday directed the Finance Ministry to work with the authorities concerned like NRB to ease the procedure the prospective borrowers have to follow to get the loans. It also asked the ministry to consider extending the loans by accepting the projects as collateral.
Agriculture Development Bank Limited (ADBL) leads the commercial banks extending loans under this scheme. “Our loan disbursement of under the programme stands at Rs370 million as of March 13,” said ADBL CEO Lila Prakash Sitaula. “We are aggressively marketing such loans and we expect to disburse Rs500 million by mid-April.”
Other commercial banks, however, have lagged behind. Bankers said they are finding it difficult to disburse the loans as the number of prospective borrowers has remained very low. “Because of the Rs10 million cap, bigger ventures cannot qualify for the facility, limiting our lending,” said Nepal bank Limited CEO Devendra Pratap Shah.
According to the working procedure unveiled by NRB, an individual can borrow a maximum of Rs10 million under this scheme The working procedure has categorised 12 areas of agriculture eligible for the facility. The areas include vegetable production, processing and storage; seed production, processing and storage; floriculture; livestock; fruits production, processing and storage; and dairy production, processing and sales.
Fishery, production and sales; mushroom production, processing and storage; animal slaughter house and meat business; herbal production, processing and storage; sugarcane, cardamom and ginger farming, storage and processing; and agriculture business are other areas eligible for the subsidy.
The interest subsidy facility can be availed only on investments made in areas outside the Kathmandu Metropolitan City and other sub-metropolitan cities. The repayment period will range from a minimum of three months to a maximum of five years. One bank can lend a maximum amount of Rs1 billion. Provided a bank wants to lend more, it has to take the NRB’s approval.
To make available the subsidised amount to the banks, the government has opened an account named “Agriculture Credit Interest Subsidy Reimbursement” in the central bank. The Finance Ministry has deposited Rs 500 million in the account.