Farmers not getting credit even at higher rate: NRB report

Kathmandu, June-28 Though Nepal Rastra Bank (NRB) has been pushing hard for expansion of credit to agriculture sector, farmers are not getting credit as per their need even by paying high interest rates, a case study commissioned by the central bank shows.

According to a report titled 'Agricultural Credit and its Impact on Farm Productivity: A Case Study of Kailali District', farmers in the study area have not benefitted much from the credit facility in production of food crops and vegetables because of high interest rate charged and low productivity of agricultural sector.

The study is based on a survey conducted by NRB Dhangadhi Office with a sample of 100 farmers (50 agricultural credit users and 50 credit non-users) and 10 officials from banks and financial institutions based in Kailali. According to the study, more than two-thirds of the sample farmers, who have taken agricultural credit, responded that it is difficult to obtain such credit.

Existing NRB policy requires banks to provide at least 20 percent of their total loans to productive sector and at least 12 percent to agriculture, energy and tourism sector.

The study has, however, found that farmers, who received the credit facility, have a better access to improved seeds, fertilizers, pesticides and better irrigation facility. "In the study area, all the farmers using the credit facility have achieved a higher technical efficiency level (82 percent on the average) whereas the farmers not using the credit facility have a lower level of technical efficiency (63 percent on the average)," the study concludes.

"Thus, agricultural credit services should be extended and deepened even in rural areas to increase farmers' access to better inputs and mechanized techniques of production so that they can attain higher level of technical efficiency," added the study.

Similarly, the study shows bank and financial institutions (BFIs) are skeptic about repayment of loan disbursed to the agriculture sector. "They demand a lot of mortgage and annual income of farmers. Small farmers have, thus, little access to agricultural credit," the report reads.

More than 54 percent of the sample farmers, who were enjoying agricultural credit during fiscal year 2012/13, pointed out unwillingness of banks as the major constraint behind credit expansion to agriculture sector. Insufficient mortgage and lack of access to BFIs, among others, were the other constraints, according to the study.

Similarly, quantity of land owned and annual income of the farmers are the major determinants for agricultural lending decision by the BFIs, according to the study.

"This problem can be resolved by introducing agricultural insurance policies, ensuring fair market price of agricultural products, and raising productivity of agriculture sector," the study recommended.

Source: Republica