Now all small entrepreneurs to get subsidized agro loans

KATHMANDU, March 16: The government has eased age restriction for ‘small entrepreneurs’ to seek subsidy on agro loans.
Making amendments to the ‘Working Procedures related to Subsidy to be Provided on Loans for Commercial Farming 2071’ through the cabinet meeting last week, the government opened the subsidy opportunity to youth and ‘small entrepreneurs’.

Previously, only the ‘youth’ farmers -- in age group of 21 to 45 years -- were eligible for subsidized agro loans. The government had introduced the program to offer subsidized loans at 6 percent interest rate to youth to start or operate commercial farming.

The amended working procedures define ‘small entrepreneurs’ as any firm or person who run commercial farming by borrowing up to Rs 10 million.

With the amendment coming into effect, aspiring borrowers will be able to get loans from development banks and financial companies as well. Earlier, only ‘A’ class licensed commercial banks were allowed to extend such loans.

The government made amendment to the working procedures following complaints from various quarters that provisions in the working procedures will make it difficult for small and rural farmers to seek the benefits.

Grilling NRB Governor and the officials of the finance ministry on January 2, the parliament’s Agriculture and Water Resources Committee had directed the ministry and NRB to revise the procedures to ease age restriction and change provision that permits only commercial banks from floating subsidized loans, among others.

The government has also made slight changes in the definition of ‘rural areas’. Now onwards, farming ventures all over the country, except metropolitan city, can seek subsidized ago loans.

Though the ceiling for ‘general loans’ has been kept unchanged at Rs 10 million, the government allows farmers to borrow a maximum up Rs 30 million for running ‘cold storage’.

However, BFIs can float loans above the ceiling amount based on the rationale of the project if ‘coordination and monitoring committee’ deems it fit to extend the loan.

NRB issued directive for enforcement of the new amendment on Sunday itself.

Though the program was announced in the current budget and subsequently introduced by the NRB by issuing working procedures in the last week of October, banks were reluctant to float loans, citing lack of clarity in the procedure regarding the reimbursement of four percent subsidy that the government provides to the banks.

“The revised working procedure will address almost all the concerns raised earlier,” Manmohan Kumar Shrestha, executive director at Banks and Financial Institutions Regulation Department of NRB, told Republica. “Now, aspiring farmers will not have to face any problems to get subsidized loans,” he added.

To address the concern of BFIs, the government has scrapped a provision that allows NRB to recover reimbursed subsidy from the concerned bank if the loans were found of not being used on the right project.

The central bank, however, can stop reimbursement if the loan is misused by the borrower.