State-Owned Bank Threatens Legal Action Against 15,000 Indebted Farmers
By Salai Thant Zin 7 November 2014
PATHEIN — The Myanmar Agricultural Development Bank is threatening legal action against more than 15,000 farmers in Irrawaddy Division who have failed to pay back their loans on time, a representative of the state-owned bank said.
A total of 15,472 farmers in the Irrawaddy Division districts of Pathein, Myaubin, Hinthada, Pyapon and Labutta have to repay a combined US$8.9 million, or about $575 per farmer, which they borrowed to grow paddy in the 2013 monsoon and dry seasons, said Kin Maung Lwin, manager of the bank’s Irrawaddy Division branch in Pathein.
He said the bank had extended the grace period of the loans until September but still the repayments were overdue, and bank employees had now posted notices on the homes of the farmers warning them to pay.
“Through the concerned village administrators we issued a notice urging the farmers to pay back the loans within one or two weeks. If they still fail to repay we put up notices on their houses or their paddy fields, asking them to repay the loans after they sell the house or after the harvest,” Khin Maung Lwin said. “If they do not do so, we will charge them with misappropriation.”
He said the farmers could be charged under the Land and Revenue Act. It is unclear what penalties this law sets out for misappropriation.
The Myanmar Agricultural Development Bank is the largest microfinance lender in Burma, where private and commercial microfinance is still in its infancy, and it provides low-interest loans of about $100 per acre of paddy to more than 1 million farmers.
Khin Maung Lwin said local branch managers had also been instructed to take action against farmers who had lied about the amount of acres they own in order to get bigger loans from the bank. The farmers have been warned to repay their loans within five to ten days or face legal action for cheating under the Penal Code’s Article 420, which stipulates prison terms of up to seven years and a fine.
Khin Maung Lwin said the number of farmers who are indebted to the bank rose sharply last year, adding that in 2013 farmers in 16 townships had repayment problems, while 2012 farmers in only two townships had problems.
Farmers in the Irrawaddy Division regions told The Irrawaddy that the bank was to blame for their financial woes as it had been late in providing loans in 2013—something that was confirmed by the bank.
This forced the farmers, who need cash ahead of the harvest season, to loan money from predatory private lenders that charge very high interest rates. When the bank finally provided the loans, farmers said they used them for household expenses or to pay off their rising debts to private lenders. Subsequently, they were left without enough money to repay the bank.
“Farmers did not get government loans when it was time to grow paddy in the  monsoon. So they have to borrow at high interest rates from private lenders,” said a farmer from Pathein Township’s Ward No 9.
“When they get loans from the government bank, the money goes to household expenses. After they reap the harvest, they have to repay the private lenders,” said the farmer, who asked not to be named.
He added that some farmers also acted irresponsibly by spending the government loans on buying possessions, such a motorbikes.
Khin Maung Lwin said the repayment problems presented the bank with a serious challenge as it could undermine its financial stability and threaten its future loan-providing capabilities.
“It will affect lending by the government if the bad debt increases. If the government is no more able to provide loans because of this, ultimately farmers will suffer,” he said.
The Myanmar Agricultural Development Bank is one of several decades-old, state-owned banks that have been providing loans in agriculture areas against low interest rates, while running financial losses.
According to Khin Maung Win, it provided loans to farmers owning 2.45 million acres of farmland in Irrawaddy Division. The region is Burma’s most productive rice-growing area and home to more than 3 million farmers.