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Financial sector illiberal towards agriculture

Khabarhub

July 23, 2022

4 MIN READ

Financial sector illiberal towards agriculture

KATHMANDU: Financial institutions are seen to be tightfisted when it comes to the agricultural production sector.

This is stated in the Monetary Policy for Fiscal Year 2022/23 Nepal Rastra Bank unveiled on Friday.

According to the NRB, the financial institutions were required to invest 15 percent of their investable amount in the agriculture sector but they are found to have invested only 12.8 percent of this amount.

“On the one hand, the import in agriculture has peaked, and on the other, the financial institutions are seen to be parsimonious in investing in this sector. This means dependence on foreign import in agriculture is not going to lessen any time soon,” economist Bhawani Khanal said.

The financial institutions had invested Rs 490 billion 150 million in the agriculture sector by the end of the last fiscal year, 2021/22.

Investment of this amount means nearly three percent less of the 15 percent amount that they are required to invest.

The number of farmers taking concessional agricultural loans during that period as of June 14, 2022, is 60,618. They took concessional loans amounting to Rs 139 billion 684 million.

The budget for the fiscal year 2022/23 states that a balanced agricultural trade would be maintained in the next five years by means of agriculture transformation.

Although it is mentioned in point No 18 of the budget document that the import of rice, maize, wheat, vegetables and fruits should be decreased by 30 percent, the financial institutions are not enthusiastic in investing in agriculture to reduce import.

“There is a large population of small farmers in Nepal,” said Uddhav Adhikari, the coordinator of the Agriculture Campaign for Food. He said the Monetary Policy and the budget for fiscal year 2022/23 is not in favor of the actual small farmers.

The Monetary Policy has made provision by which the real agriculture entrepreneurs can take project loan of up to Rs 2 million for running an agricultural business. However, the small farmers are not likely to benefit from this provision.

It is estimated that there are around eight million small farmers in the country. Most of the small scale farmers, who earlier ran projects keeping collateral, have no projects.

Middle-class farmers, who have run projects keeping collateral in the bank, would be benefitted from this arrangement. Small scale farmers have fragmented arable land but land is left uncultivated due to lack of timely fertilizer, seeds and irrigation facility.

Though the government had brought a plan to manage the fragmented land, it has not been effective.

The budget of the current fiscal year has laid emphasis on production through modernization, commercialization and mechanization of agriculture. But there is no any symptoms of reduction of dependence on agriculture immediately as arable land is gradually becoming barren, population involving in farming becoming centralized in the cities and selling arable land as housing plots.

The monetary policy has mentioned about making the agriculture loan, mentioned in the budget, effective through establishment of microfinance fund. Small scale farmers are found elated after the policy mentioned that the amount deposited in the fund would be taken to door steps of the farmers.

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