In Bangladesh, agriculture is the biggest employment sector, making up 14.2% of the country’s GDP in 2017 and employing about 42.7% of the workforce. The government has always provided special subsidies in the sector. Furthermore, easy loans for farmers are being offered by different government and private banks. The specialized schemes make it easier for the farmers to avail the loan to keep the cycle of production going. However, several factors should be considered before opting for an agriculture loan. Let's look at some of them as well as the best loans for agriculture in Bangladesh.
Factors to consider before applying for Farming Loans
It is important to have a proper business plan before applying for an agricultural loan. Like any loan, agriculture loans, in general, require a statement of solvency to ensure debt repayment. Having a proper business plan allows a farmer or farm owner to better show the repayment procedure making them easily qualified for the loan.
Almost all agricultural loans require some form of down payment. This usually ranges from 20-25% of the sum of the loan. In the absence of down payment, many banks accept the farm areas like security. The actual rate of down payment differs from bank to bank. However, every bank requires some form of down payment as a security.
There are often situations where the farmers may not need full-scale loans. The difference between a regular loan and a microloan is in the rate of interest and flexibility. While traditional loans will require security and down payment, taking microloan farmers can enjoy flexible repayment options as well.
Investment or Operational Loan
There are mainly two categories of agricultural loans – operational loans and investment loans. A farmer can apply for operational loans when he aims to use the money to operate the existing logistics and grow crops. The other form of loan is the investment one where the farmer uses the money to buy logistical necessities associated with farming. There are different subsidies available for operational loans. Therefore, it is important to know about the type of loan before applying.
Best Agricultural Loans in Bangladesh in 2021
Prime Bank Agriculture Loan
Prime Bank is one of the leading private banks of Bangladesh established in 1995. As a reputed Bangladeshi bank, it has had its contributing share in the agricultural development of Bangladesh. Their agriculture loan schemes are the result of that continuous effort.
The Abad or Crop loan scheme is an operational loan intended for the farmer, shared croppers as well as landless farmers to operate their production capabilities. It is a general loan scheme that can go up to 3 Lac BDT as per the need and qualification of the farmer. The loan tenure is for 6 months with the option for an extension as per the guideline of Bangladesh bank.
In addition to grass-root farmers, Prime Bank has loan schemes for large-scale farms and farmers. Any established farms can avail of a loan of up to 1 crore BDT as part of their “Khamar” loan scheme. The loan covers a diverse range of farms and the tenure ranges from 1 year to 3 years for long-term projects.
Established farmers can take a loan of up to a similar amount of “khamar” as part of the “Nabanno” project. The loan is aimed at setting up a new agricultural base as well as expensive machinery and utilities. The core details are similar to that of the “Khamar” scheme.
Bangladesh Krishi Bank Loan
Bangladesh Krishi Bank is the only specialized agricultural bank in the country. The bank, founded in 1973, is a fully government-owned and operated bank with a complete focus on the agricultural development of the country. As a result, the bank has several loan schemes and opportunities for the farmers as well as the farms.
The core credit program of the bank focuses on crop and fisheries loans. These two are the main aspects that the bank focuses on their credit system.
In addition to the crop and fisheries, the bank offers several specialized farm loans. The bank has livestock and continuation loans as well. The specialty of the Krishi bank is that it provides microloans to grassroots farmers without any deposition and security.
From micro to large farms, the bank offers varied sums to qualified farmers and farms. The bank has a specialized loan scheme for cattle raising which offers a maximum of 25 thousand BDT for a total of 5 calves.
The interest rate varies by farming sector but it's subsidized owing to subsidization from the government.
Uttara Bank Limited Agricultural Credit
Uttara Bank is one of the oldest and pre-independent private banks of Bangladesh. The bank is one of the largest in the private sector and offers loan schemes for diverse sectors including agriculture.
The specialized agricultural credit of Uttara Bank provides short, mid-term as well as micro-credit schemes for farmers and farms.
The bank offers loans for operational as well as investment in the farming sector. Any eligible farmer or farm owner can avail of this loan and the bank decides on the loan sum as per the Bangladesh Bank (BB) policy. They exclusively follow the BB policy for loan head generation. The loans are provided at a competitive rate of 10% which is subject to changes based on the loan details. The bank doesn’t require any down payment but it does require 2 personal guarantors.
EXIM Bank Agricultural Loan
EXIM Bank offers agricultural loans as part of their EXIM Kishan as well as EXIM Farmer scheme. These two schemes serve two different purposes as per the regulatory directives.
The EXIM Kishan is designed as an investment loan without any collateral for the farmers. This is a specially suitable scheme for sharecroppers and marginal farmers. The investment size reaches from 10 thousand BDT to up to 20 Lac BDT.
The EXIM bank farmer initiative is another investment scheme against a deposit scheme. The minimum deposition starts at 12500 BDT. All the standard agricultural investment procedures apply in this scheme as well.
IFIC Bank Suborno Gram
The Suborno Gram scheme of IFIC bank is a specialized loan scheme devised for the crop and the fisheries sector.
The loan is available for the crop sector on a short-term loan basis. The maximum loan amount for the crop sector is 20 Lac BDT. The tenure is fixed at 12 months along with the standard interest rate as per the policy of BB.
The fisheries sectors can also receive short-term loans at a small scale or medium scale. The short-scale is capped at 50 Lac BDT whereas the medium-scale goes all the way up to 2 crore BDT. The repayment and other details are similar to that of crop one. A beneficiary may choose between one-time repayment within the allocated time or EMI options.
BRAC Bank Tara
The BRAC bank Tara is another excellent loan choice when it comes to the agricultural sector. This is an all-in-one loan scheme devised for the manufacturing, trade business as well as agriculture.
The interest rate of the scheme is flat at 7%. But the Covid situation has had the subsidization from BB which is currently 4% for the time being. Another key feature of the loan is that there is no processing fee involved.
The loan can be availed as a secured one but in that case, the bank would require a specific mortgage based on the allocated sum. For medium to large farms, the loan limit is between 10 Lac BDT to 5 crore BDT. The loan can only be availed as part of a sole proprietorship or partnership.
EBL Agricultural Loan
EBL is one of the premier private Banking organizations of Bangladesh. As part of their diverse financing scheme, the bank also has a standard agricultural loan scheme.
The bank provides agricultural loans mainly in sectors including crops, fisheries, and livestock.
The tenure of the loans ranges between 6 months to 5 years. A competitive loan structure is available for qualified farmers and farms. The loan amount varies between 10 thousand BDT to up to 1.5 Lac BDT. The loan can be availed as both one time grant or as a revolving scheme. Since this is a loan scheme geared towards the sharecroppers and marginal farmers, there is no need for collateral or deposits. The bank also does not charge any form of processing fee.
As an agrarian country, Bangladesh’s dependence on agriculture for GDP growth is immense. As a result, almost all the leading banks and financial institutions of the country have credit systems for agricultural development at the root level. So far, we have discussed the best agricultural loan schemes in Bangladesh offered by different banks. Not to mention, these banks are the leading ones when it comes to pioneering agricultural empowerment in the country.