The CEO of Bank Keshavarzi (Agriculture Bank of Iran) said the specialized bank should mobilize all it has to help promote the government’s agro development agenda.
Addressing branch managers in the Ardabil Province, Morteza Shahidzadesh said, “Only through your concerted effort, we can achieve our goals to implement government policies in the key agricultural sector,” Banker.ir reported Wednesday.
On the importance of agricultural insurance in supporting national production, he noted that agricultural insurance schemes have so far extended credits to more than 1.5 million entities. “Presently we are focused on risk factors as one of the main concerns of the agricultural sector and seek to encourage farmers to increase their yield.”
He cautioned that increased borrowing from the Central Bank of Iran is not an option to address liquidly problems that have plagued most banks for several years. “By leaning on facilities from the regulator, not only do we lose our creativity in resolving problems but we also hamper government efforts to reduce inflation. By reducing dependence on the CBI and its facilities we can control the risks and improve the bank’s capital and lending facilities.”
Personnel at the bank’s branches were thanked by the CEO for paying wheat farmers on time. “We had an unprecedented accomplishment by paying the dues of close to 95% of farmers, and hopefully the rest will be made available by the end of the week.”
As per law the government has a commitment to buy at “guaranteed prices’ wheat from farmers across the country. The payments, through the agriculture bank, are normally delayed due to a variety of reasons leading to problems for the farmers and their next farming season.
The Agriculture Bank of Iran is the principal lending institution to farmers. It has been providing loans and credits to help augment agricultural production, alleviate poverty and improve yields. Though the latest data of loans provision is not available, the mounting water crises, poor infrastructure, collateral limitations, high risk factors, failure of repayment and the pattern of draught has made the job of banks more difficult.
Major Challenge
In recent years farmers have complained about high interest rates and low crop prices that has led many to default and/or unable to meet their commitment to the bank or other lending institutions. This, however, does not take away the increasing criticism of major banker and lenders said to be averse to lending to small farmers and horticulturists whose survival depends of borrowing.
The declining lending power of banks has emerged as a major challenge to the economic reform of the government saddled with high inflation, unemployment and recession. Banks are regularly assailed in the mass media for alleged corruption and their tendency to work with major companies and investors wanting to make a fast buck. This preference, however, has resulted in the increasing number of bad loans due to the deteriorating economic conditions and insolvency of the big borrowers now unable or unwilling to repay the huge loans.
Problems associated with agriculture and farming is conspicuous in the rural to urban migration over the past quarter century that has sent shock waves in the decision and policy making establishments, not to mention the negative impact of demographics and the resulting stress on development planning. Official reports have it that entire villages have been emptied as the banks shy away from rural and agriculture financing and the young rural folks move to the already saturated urban areas in search of work.
