Central Bank backs agro growth through credit from formal financial sector, rather than direct intervention

Central Bank’s new thrust to grow the agriculture sector would be backed by credit from the formal financial sector, rather than direct intervention from the bank, officials said. Central Bank’s new thrust to grow the agriculture sector would be backed by credit from the formal financial sector, rather than direct intervention from the bank, officials said. The Sri Lankan Central Bank has a tradition of pushing rural credit, and getting involved in poverty alleviation programs.

In recent years, the Bank has been focusing on stabilising the economy, the financial sector and containing inflation by fine tuning a monetary policy framework and an attendant transmission mechanism, with vegetable growing taking a back seat.

The new Governor Sunil Mendis says the Central Bank will re-focus on developing the agriculture sector, which is lagging behind.

But officials say the Central Bank is unlikely to go back to programs like subsidised credit, which do not always bring required results, due to hidden costs.

Subsidised credit programs, which require massive paperwork and approvals, are slow to be disbursed and farmers who need money quickly do not always get it.