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Private sector growth is the answer

Priority sector lending (PSL) is really now really taking off.

The Cabinet has issued an order to form PSL committee in pursuant to the scheme that the Royal Monetary Authority (RMA) launched. Dzondags will serve as the chairman of the committee. Members include representatives from the ministry of agriculture, labour, education, regional trade office, GNHC, land commission and the National Environment Commission.

What the PSL committee will do is assess and approve proposals submitted by prospective clients and provide clearances. Lack of such schemes has stunted the growth of small industries, which affected the overall economic growth. All these, ultimately, have direct link to some of the challenges that we are confronting today. That is why this development is important.

Already agriculture is getting some real place in our development strategy. From the total domestic loan of about Nu 97 billion, agriculture sector has been holding only five percent of the share, which is minuscule. Because agriculture is at the heart of economic development and the national dream of achieving food self-sufficiency, giving youth and farmers equal access to finance is important. What is good about this scheme is that it will not require collateral and guarantor.

The scheme has the real potential to address the issue of rising youth unemployment and decreasing contribution of the agriculture sector. Skewed vision and policy failures have been expensive.

It is estimated that PSL will inject a total of Nu 1.5 billion capital for cottage and small industries (CSI) – Nu 530 million for primary agriculture and livestock production and Nu 950 million for non-agriculture CSI. Commercial banks will now provide collateral-free loan for CSI. Interest rates would also be slashed. With interest rate at 8.5 percent, the maximum loan ceiling is Nu 500,000 for farmers and Nu 10 million for cooperatives and companies.

As we prepare to graduate from the group of the least developed countries, there is a need to look at agriculture seriously because doing so will also help the nation address the biggest bane of our times – rising youth unemployment. Private sector growth is the answer.

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