Separate Rs 30.6 Crore Credit Guarantee Fund Being Established to Protect Loans of Marginal Farmers
A special credit guarantee fund of USD 2 million (over Rs 30 crore 60 lakh) is being established under the leadership of the Deposit and Credit Guarantee Fund. This fund will provide easy agricultural loans to small farmers in nine local units across Sudurpashchim, Karnali, and Bagmati provinces, and risk-sharing guarantees to financial institutions.
Kathmandu. A credit guarantee fund of USD 2 million (over Rs 30 crore 60 lakh) is being established to provide agricultural loans and risk coverage for small farmers.
Led by the Deposit and Credit Guarantee Fund, this special fund will, in the first phase, provide easy agricultural loans to farmers in selected municipalities across Sudurpashchim, Karnali, and Bagmati provinces, and credit guarantees to financial institutions. The scheme will be piloted in Panchkhal Municipality in Kavrepalanchok, Chandannath Municipality, Patarasi Rural Municipality, and Tatopani Rural Municipality in Jumla, Birendranagar Municipality in Surkhet, Budhiganga Municipality and Tribeni Municipality in Bajura, and Dhangadhi Sub-Metropolitan City in Kailali.
Implemented as a master plan under the initiative of the United Nations Development Programme (UNDP), the proposed scheme aims to address the financial constraints faced by small farmers, cooperatives, and agriculture-based small, partnership, and micro-enterprises in the target local units.
The Deposit and Credit Guarantee Fund will implement this as a model project. Under this, financial institutions will be provided risk-sharing guarantees on loans exceeding USD 1 million (over Rs 1 arba 53 crore 18 lakh) extended to agriculture and agricultural value chain activities. This is expected to increase credit flow in rural areas and directly benefit about 3,000 farmers from disadvantaged communities.
The scheme is being developed under the 'Innovative Financial Solutions for Food System Transformation in Nepal' project, part of the 'Joint Sustainable Development Goals Fund' operating in Nepal under the coordination of the UN Resident Coordinator and joint implementation of UNDP, UNCDF, FAO, and WFP.
Under this project, farmers in nine local units across three provinces are planned to be included in the agricultural credit program. As per the scheme, the loan amount to be guaranteed will range from a minimum of Rs 250,000 to a maximum of Rs 30 million per borrower. The Fund has formulated and enforced the Agricultural Credit Guarantee Scheme, 2083 for loan disbursement and guarantee.
Achyut Pant, spokesperson for the Deposit and Credit Guarantee Fund, said the scheme will increase financial access for businesses and individuals contributing to the agricultural sector and the entire agricultural value chain.
Similarly, farmers will be selected from among loan applicants by banks according to prevailing rules, Pant informed. 'The concerned local units and UNDP (United Nations Development Programme) will facilitate this,' he said. The maximum loan tenure has currently been set at 7 years. The interest rate will be as per the bank's prevailing rules.
Loans will be available in three forms: without collateral, partial collateral, or full collateral. After implementation of this model program, achievements will be reviewed in 2 years. 'If the review shows expected results, it can be expanded to additional areas,' he told Insurance Khabar, 'Even if not expanded to additional areas within two years, expansion can be done based on the subsequent evaluation.'