Loan flow to farming sector sees slower growth

Farm sector loan rises by only 8 percent while other sectors see double digit growth

KATHMANDU, March 22: At a time when the government is prodding the banking industry to increase lending to productive sector, loan flow toward agriculture sector over the first seven months of 2016/17 grew by only 8.1 percent.



According to statistics of Nepal Rastra Bank (NRB), BFIs extended loans worth Rs 6.37 billion in agriculture sector in the first seven months of the current fiscal year. BFIs have a total of Rs 85.16 billion in outstanding loans in the agriculture sector. 



Growth in agriculture loans in the review period is lower compared to credit growth of 12.4 percent in industrial promotion sector, 16.8 percent in construction sector, 12.4 percent in wholesale and retail trade sector, 13.5 percent in service sector and 21.8 percent in transport, communication and public sector, according to the central bank.



Farm sector loan growth in this fiscal year, however, is still higher compared to a growth of 3.9 percent, or Rs 2.54 billion, in the corresponding period of the last fiscal year. BFIs had a total of Rs 67.7 billion of outstanding loans as at mid-February, 2016.



Experts say that the BFIs are still reluctant to extend financial resources to the agriculture sector compared to other sectors like automobile, hire purchase and stock market where they see high return and chances of less default. 



Credit of BFIs toward animals farming/service surged by Rs 2.63 billion in the review period to reach a total of Rs 31.39 billion. Similarly, loans to 'other agriculture and agricultural services' rose by Rs 3.86 billion and the total outstanding loans to this sub-sector has reached Rs 38.11 billion. Credit growth to tea sub-sector, however, declined by Rs 481 million in the review period. Similarly, BFIs' exposure of loans to forest, fish farming and slaughter also fell by Rs 617 million as of mid-February.



BFIs extended total credit of Rs 981.8 million in the farming/farming service sub-sector in the review period. 



Bankers, however, maintain that loan flow to the agriculture sector has posted a robust growth. “The central bank always says that the BFIs have been reluctant to provide credit to agriculture sector which is not true. We do not deny loans if we see possibility of repayment of loans,” said a commercial bank's CEO. “At a time when the banking industry is facing shortage of lendable fund, the current growth of credit toward the agriculture is satisfactory.”

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