In Bangladesh, agriculture is the largest employment sector, accounting for 14.2% of the country’s GDP in 2017 and employing around 42.7% of the labor force. The government has always provided special subsidies in the sector. In addition, easy loans for farmers are offered by different government and private banks. Specialized schemes make it easier for farmers to benefit from the loan to keep the production cycle going. However, there are several factors that should be taken into account before opting for a farm loan. Let’s take a look at some of them as well as the best loans for agriculture in Bangladesh.
Factors to Consider Before Applying for Agricultural Loans
It is important to have an appropriate business plan before applying for a farm loan. Like any loan, agricultural loans, in general, require a credit report to ensure debt repayment. Having a proper business plan allows a farmer or farm owner to better demonstrate the repayment process, making them easily eligible for the loan.
Almost all agricultural loans require some form of down payment. This usually ranges from 20 to 25% of the loan amount. In the absence of a down payment, many banks accept agricultural areas as collateral. The actual down payment rate differs from bank to bank. However, every bank requires some form of down payment as collateral.
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Often, farmers do not need large-scale loans. The difference between a regular loan and a microcredit is the interest rate and flexibility. While traditional loans will require security and a down payment, farmers who accept microloans can also take advantage of flexible repayment options.
Investment or operating loan
There are mainly two categories of agricultural credits: operating credits and investment credits. A farmer can apply for operating loans when he wants to use the money to tap existing logistics and grow crops. The other form of loan is investment where the farmer uses the money to buy logistical necessities related to agriculture. There are different grants available for operational loans. It is therefore important to know the type of loan before applying.
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Best agricultural loans in Bangladesh in 2021
Agricultural loan from the first bank
Prime Bank is one of the leading private banks in Bangladesh established in 1995. As a reputable Bangladeshi bank, it has contributed to the agricultural development of Bangladesh. Their agricultural loan programs are the result of this continued effort.
The Abad or Crop loan program is an operational loan aimed at the farmer, shared farmers as well as landless farmers to exploit their production capacities. This is a general loan of up to 3 Lac BDT depending on the needs and qualification of the farmer. The term of the loan is 6 months with the possibility of an extension according to the directive of the Bank of Bangladesh.
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In addition to grassroots farmers, Prime Bank offers loan programs for large farms and farmers. All established farms are eligible for a loan of up to BDT 1 crore under their “Khamar” loan program. The loan covers a wide range of operations and the tenure varies from 1 year to 3 years for long term projects.
Established farmers can borrow up to a similar amount of “khamar” under the “Nabanno” project. The loan aims to set up a new agricultural base as well as expensive machinery and utilities. The basic details are similar to those of the “Khamar” diagram.
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 focused entirely on the agricultural development of the country. As a result, the bank has several loan programs and opportunities for farmers as well as farms.
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The bank’s core credit program focuses on crop and fishing loans. These two aspects are the main aspects that the bank focuses on in its credit system.
In addition to culture and fishing, the bank offers several specialized agricultural loans. The bank also has livestock and business loans. The specialty of Krishi Bank is that it provides microloans to grassroots farmers without any deposit or guarantee.
From microphones to large farms, the bank offers various amounts to qualified farmers and farms. The bank has a specialized cattle breeding loan program that offers a maximum of 25,000 BDT for a total of 5 calves.
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The interest rate varies by agricultural sector, but it is subsidized due to government subsidies.
Uttara Bank Limited Credit Agricole
Uttara Bank is one of the oldest and pre-independent private banks in Bangladesh. The bank is one of the largest in the private sector and offers loan programs for various sectors, including agriculture.
Uttara Bank’s Specialized Agricultural Credit offers short- and medium-term micro-credit programs to farmers and farms.
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The bank offers farm loans as well as investments in the agricultural sector. Any eligible farmer or agricultural owner can benefit from this loan and the bank decides the loan amount according to the policy of the Bangladesh Bank (BB). They exclusively follow the BB policy for the generation of credit heads. Loans are made at a competitive rate of 10% which is subject to change depending on the details of the loan. The bank does not require any deposit but requires 2 personal guarantors.
Agricultural loan from the EXIM Bank
EXIM Bank offers agricultural loans under their EXIM Kishan program as well as EXIM Farmer. These two regimes serve two different purposes depending on regulatory guidelines.
EXIM Kishan is designed as an investment loan without any collateral for farmers. This is a regime particularly suited to sharecroppers and marginal farmers. The size of the investment reaches from 10,000 BDT up to 20 Lac BDT.
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Another investment program against a deposit system is the EXIM Bank Farmers Initiative. The minimum deposit starts at 12,500 BDT. All standard agricultural investment procedures also apply to this scheme.
IFIC Bank Suborno Gram
IFIC Bank’s Suborno Gram program is a specialized loan program designed for the crop and fisheries sector.
The loan is available for the crop sector on the basis of a short term loan. The maximum loan amount for the crop sector is 20 Lac BDT. The term is fixed at 12 months with the standard interest rate according to BB’s policy.
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Fishing sectors can also receive short-term loans on a small or medium scale. The short scale is capped at 50 BDT Lake while the medium scale goes up to 2 BDT crore. The refund and other details are similar to the first harvest. A beneficiary can choose between a one-time reimbursement within the allotted time frame or EMI options.
BRAC Bank Tara
BRAC Tara bank is another great loan choice when it comes to the agricultural sector. It is an all-in-one loan program designed for manufacturing industry, commerce as well as agriculture.
The plan’s interest rate is fixed at 7%. But the Covid situation has had the BB subsidy which is currently 4% at the moment. Another key feature of the loan is that there is no processing fee involved.
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The loan can be used as a secured loan, but in this case the bank would require a specific mortgage based on the amount allocated. For medium and large farms, the loan limit is between 10 Lac BDT and 5 crore BDT. The loan can only be used as part of a sole proprietorship or partnership.
EBL Agricultural Loan
EBL is one of the premier private banking organizations in Bangladesh. As part of its diversified financing program, the bank also has a standard agricultural loan program.
The bank grants agricultural loans mainly in sectors such as crops, fishing and animal husbandry.
The duration of the loans varies between 6 months and 5 years. A competitive loan structure is available for qualified farmers and farms. The loan amount varies between 10,000 BDT and up to 1.5 Lac BDT. The loan can be used both as a one-time grant or as a revolving scheme. Since this is a loan program geared towards sharecroppers and marginal farmers, there is no need for collateral or deposits. The bank does not charge a processing fee either.
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As an agrarian country, Bangladesh’s dependence on agriculture for GDP growth is immense. As a result, almost all of the major banks and financial institutions in the country have root-level agricultural development credit systems. So far we have discussed the best agricultural loan programs in Bangladesh offered by different banks. Not to mention that these banks are the first in terms of pioneering agricultural empowerment in the country.