The government has allocated Rs 1 billion for the program mainly to curtail ballooning trade deficit, mainly as imports of meat crossed Rs 15 billion during 2009/10. It hopes the incentives will lure more farmers into livestock farming and replace imports by promoting meat exports.[break]
“All arrangements for the disbursement of loans have been completed,” said a Ministry of Finance (MoF) official, adding that the ministry has already enforced a guideline to implement the program.
According to the guidelines, MoF will provide the allocated Rs 1 billion to SFDB at 5 percent annual interest rate, and SFDB must ensure the availability of loans to livestock farmers at rate not exceeding 9 percent through small farmers´ cooperatives.
“MoF has already sanctioned Rs 300 million for disbursement out of the total 1 billion,” said the source.
MoF has even promised to provide an interest rate exemption of 4 percentage point if the SFDB repaid the principle amount along with the interest to the government within the specified timeframe. This means, SFDB could effectively get the fund at just 1 percent, if it repaid the money to the government on time.
Likewise, the guideline also asks SFDB to pass on similar exemption facility to the cooperatives who repay loans to SFDB within the stipulated time.
For the direct benefit to the small farmers who repay the principle and interest of loan to the concerned cooperatives in time, the guideline has also made it mandatory for the lending cooperatives to not charge more than 9 percent interest to the farmers.
“We have also made it mandatory for the SFDB to submit details of such exemptions in interest by the MoF to SFDB, SFDB to farmers´ cooperatives, and farmers´ cooperatives to livestock farmers,” said the source. The interest on loan to be paid by the SFDB to the MoF will be calculated for the period between date of lending and repayment of the loan. The SFDB have to repay the loan within nine years since the sanctioning of the loan.
Jhalendra Bhattarai, senior officer of SFDB, said around 13,000 farmers associated with a total of 234 small farmers cooperatives in 40 districts are expected to get benefit from the program.
“The cooperatives that lend to farmers are not allowed to charge interest rates higher than 9 percent, if the farmers repay the loan in time. This will benefit the poor and genuine farmers,” said Bhattarai. “Also, the poor farmers would not have to undergo lengthy process under this program, unlike in other banks and financial institutions, to get the loan.”
He also said such loan system would spur competition among farmer cooperatives to lend at lower interest rates and ensure quality lending. Banks and other financial institutions have been levying interest of 18 to 22 percent due to their higher operating cost.
Small farmers´ cooperatives from 40 districts had been demanding an incentive scheme for more than 20,000 farmers.
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