Financial sector illiberal towards agriculture

(Rajaram Karki)

KATHMANDU, JULY 24 : Financial institutions are seen to be tightfisted when it comes to investing in the agricultural production sector. This is stated in the Monetary Policy for Fiscal Year 2022/23 Nepal Rastra Bank unveiled on Friday  (July 22). 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 the financial institutions are seen to be parsimonious in investing in this sector on the other hand. This means dependence on foreign imports in agriculture is not going to lessen any time soon," economist Bhawani Khanal told RSS.

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 than 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 is 60 thousand 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 about investing in agriculture to reduce imports. "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 favour of the actual small farmers. The Monetary Policy has made provisions by which real agriculture entrepreneurs can take project loan of up to Rs 2 million for running an agricultural business.

However, 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 run 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 the land is left uncultivated in a lack of timely fertilizer, seeds, and irrigation facilities. 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 are no symptoms of reduction of dependence on agriculture immediately as arable land is gradually becoming barren, the population involved in farming becomes 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 the establishment of a microfinance fund. Small-scale farmers are found elated after the policy mentioned that the amount deposited in the fund would be taken to the doorsteps of the farmers. ---