CB’s rural credit programs a success
by Gamini WARUSHAMANA
The interest subsidy mechanism introduced by the Central Bank (CB)
for rural credit programs, mainly focusing on the agricultural sector
has been highly successful, the Director, Regional Development
Department of the CB W.M. Karunaratne told the Sunday Observer.
With the success of the mechanism tested under earlier credit
programs the CB has launched a credit scheme to promote the dairy
industry in the country. The Agro Livelihood Development Loan Scheme (ALDLS)
is targeted at commercial production and marketing of liquid milk.
The loan scheme was launched in April last year and it is expected to
disburse Rs.500 million. The loans are issued at a concessionary
interest rate of 12% while the government provides 8% interest subsidy
to the banks.
If the banks achieve the targets set by the Central Bank it would
provide an additional incentive interest of 3%. The banking sector is
the main partner of this scheme and there are 13 state and private
commercial and rural development banks engaged in the program and they
use their own funds in this program, Karunaratne said.
Under the program the banks will help small and large scale dairy
farmers to upgrade and modernise their farms and increase production or
start new ventures. Karunaratne said that the loans are targeted at only
commercial ventures and not livelihood or nutritional objectives.
The farmer should be able to show earnings of Rs. 10,000 net profit
per month from the project to get the loan. To address the marketing
issues in the industry the CB will extend the same credit facilities to
the corporate private sector or small industries to collect milk and
start value added production.
In 2008, 3,462 farmers and 60 industries registered to obtain loans
and Karunaratne said that all of them will receive loans.
The loans total Rs. 853 million while the government will spend only
Rs.42 million as an interest subsidy. The CB expects to provide loans
for 15,000 farmers this year.
In addition to financial support, the Central Bank has designed an
extensive system to provide technology, knowledge, veterinary care
service, provide high yield milch cows, nutrition aspects and
cultivation of high quality grass.
The CB provides incentives for the government’s Veterinary Surgeons
and Livelihood Development Instructors in the area, based on the
achievement of the targets.
The new Comprehensive Rural Credit Scheme (NRCS), a similar loan
scheme now implemented by the CB and the banking sector has released
over Rs. 9 billion to farmers, traders and the processing and value
added industries targeting the whole value chain of agricultural
production.
The Treasury has spent around Rs.100 million as the interest subsidy
under this scheme.
The NRCS has shown impressive results and today we are able to break
the monopolies in the agro product markets including paddy, maize and
several other cereal crops.
The market trend has changed. Earlier, after the harvesting started
paddy prices started to decline. But today this trend has reversed
because thousands of traders have entered into markets with the low
interest credit.
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