"For a loan of Rs 100,000, we need to pay over Rs 12,500 to the bank much before we get the loans. This has largely discouraged farmers to take loans, said Indra Prasad Luitel, a farmer of Kalika VDC, Bardia. [break]
The government a few days ago declared Luitel as one of the best performing farmers for the fiscal year 2009/10. Luitel, who was in Kathmandu a few days ago to receive the award, had a long list of problems being faced by farmers to present to the officials.
Apart from the huge start up cost, he added that lengthy administrative processes of the banks too were forcing farmers out of the formal lending channels. “Moreover, many branches of ADBL do not even issue loans to farmers fearing low recovery rate, which is actually not the case," he said.
Interestingly, Luitel had taken Rs 80,000 in loans to buy two buffalos from Dhaulagiri Co-operatives after the Guleria branch of ADBL turned down his loans request.
“Such a situation at a time when government investment in agriculture has been declining has left farmers deprived of finances,” he lamented.
Records of ADBL too reveal that farmers need to pay 1.5 percent of total loans as service charge, Rs 500 as loan valuation charge for loans amounting up to Rs 100,000, Rs 300 for transfer of ownership of collateral to the concerned bank and Rs 200 as fees for freezing land transaction at Land Revenue Office, among others, to secure loans.
The annual interest of up to 15 percent and loan renewal fee at 0.5 percent of total loan are obvious cost that will come after the loan is approved.
Luitel further informed that ADBL branches do not provide loans less than Rs 100,000, altough it has no specific policy on minimum loans limit. "Where should small farmers go for loans, if ADBL, which has been established to support small farmers, is not there to help them?" Luitel questioned.
Farmers further need to fill up 34 different forms, acquire VDC´s certification of boundary of land to be mortgaged, open new current account in the bank and need to pledge collateral worth at least 50 percent of the total approved loan.
"Many farmers cannot fill up the forms properly and they find no friendly staff to seek help as well," Luitel stated.
ADBL officials admitted that they have been discouraging small-scale loans due to less profitability and higher administrative cost. "We have been tightening our lending to small farmers since 2005 when the bank was converted into a commercial bank," said Bijaya Raj Pokharel, chief of Loan Division at ADBL.
Going by the Nepal Rastra Bank - central monetary authority -- rule, banks need to issue at least 3 percent of the total loans portfolio to the priority sectors like hydropower, agriculture, and infrastructure, among others. However, banks are largely catering to those sectors through micro-finances.
As for ADBL, its investment in agriculture stands at Rs 8.53 billion out of the total existing loan of Rs 39.27 billion as of 2009/10.
prabhakarji@gmail.com
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