Govt asks banks to invest in agriculture

Dec-25th-2011
KATHMANDU: The government has asked banks to increase their lending in agriculture sector or face strict measures that bind them to increase their investment in the sector. Banks and finance companies are staying away from venturing into agriculture sector.

Monetary and fiscal policies have failed to encourage financial institutions to increase their lending in agriculture sector, so government will have to force them, said Prime Minister Dr Baburam Bhattarai.

“The urban centric financial institutions do not want to go into rural areas and investing in unproductive sectors like real estate, automobile etc,” he said during a seminar on ‘role of financial service in agriculture sector development’ organised by Nepal Rastra Bank (NRB). Productivity of agriculture sector is appalling as statistic show that 74 per cent of population are engaged in agriculture but the sector contributes only 35 per cent in national income.

“The need of introducing crop insurance for the farmers as a cushion to seasonal shocks,” he stressed, adding that lack of financial service to the agriculture is the reason behind the low performance of the sector. He expressed that to commercialise agriculture, proper agro marketing and technical development is required through subsidies.

Finance Minister Barsha Man Pun also stressed the lack of access to financial services is one of the reasons that agriculture is still being conducted at subsistence level despite being the occupation of majority of population of Nepal.

The commercial banks are also reluctant to lend to the agriculture sector as their balance sheet shows that agro loans comprise only three per cent of total lending, he pointed out. There is a need to increase investment in agro related sectors such as processing, cold storage, fertilisers and most importantly in agro insurance, he suggested.

NRB governor Dr Yubaraj Khatiwada emphasised on need of upgrading of technology used in the production in order to develop agro sector. “There is no prospect for developing agro sector in the absence of proper research and development,” he said lamenting that even donor agencies are indifferent regarding the matter.

“The absence of proper agriculture marketing infrastructure helping middlemen to earn more than the farmers,” he said adding that minimum price fixed by the government for agriculture products has to be high enough to cover production cost.