Thursday, September 21, 2017

Agriculture ministry requests K500 billion loan

The Minister of Agriculture yesterday asked parliament to approve a K500 billion loan from the Central Bank that would allow the state-run Myanma Agricultural Development Bank to issue larger loans to farmers this coming monsoon season.

A paddy farmer works in the fields. Kaung Htet/ The Myanmar TimesA paddy farmer works in the fields. Kaung Htet/ The Myanmar Times

The state bank is run under the agriculture ministry and provides financing to 2 million farmer households. Forced to turn to informal moneylenders after floods last year destroyed hundreds of thousands of acres of paddy – and hit by falling rice prices and exchange rate volatility – farmers earlier this year called for urgent government intervention.

If the loan is approved by the Pyidaungsu Hluttaw, the Central Bank will provide a K500 billion one-year loan at 5 percent interest, Central Bank deputy governor Daw Khin Saw Oo and Minister for Agriculture U Aung Thu told parliament yesterday.

The loan must be approved and allocated before farmers begin planting for the rainy season harvest, U Aung Thu said. It would be registered under the Ministry of Planning and Finance, on behalf of the agriculture ministry, with rules and regulations to be negotiated with the Central Bank, he added.

MADB is mostly financed by Myanma Economic Bank, but has received additional financing from the Central Bank since 2015. A decision on whether to approve the loan will be made on May 23, said Speaker Mahn Win Khaing Than.

On May 9, the state agriculture bank announced it would raise the size of its per-acre loans from K100,000 to K150,000 for rice farmers during the monsoon season.

These loans will be limited to 10 acres in line with previous MADB loan policy, U Soe Tun, vice president of the Myanmar Rice Federation, said last month. Some farmers are happy at the increase, although others want longer-term loans with no limitation on acreage.

MADB, which is barely profitable with rising levels of non-performing loans, will also raise interest rates from 5pc to 8pc to ensure its survival.

MADB official U Khin Maung Nyein said the new rate is “still lower than the farmers can get elsewhere”.

Translation by Kyawt Darly Lin