Farm credit

The Pak Banker - - FRONT PAGE -

Ad­dress­ing the mid-term re­view meet­ing of the Agri­cul­tural Credit Ad­vi­sory Com­mit­tee (ACAC), State Bank gover­nor ex­pressed the hope to achieve agri­cul­ture loan tar­get of Rs1,001 bil­lion set for 2017-18 as banks dis­bursed Rs432bn dur­ing the first six months of this fis­cal year. In this con­text he urged the pres­i­dents and CEOs of all banks to set up agri­cul­tural credit com­mit­tees com­pris­ing all group heads in their in­sti­tu­tions and per­son­ally head these com­mit­tees. He said that due to im­prove­ment in agri­cul­tural credit in­fra­struc­ture, the dis­burse­ment trend has im­proved in un­der­served prov­inces like KP and Balochis­tan. For pri­ori­tis­ing agri­cul­ture lend­ing, the SBP gover­nor ad­vised that in­ter­nal agri­cul­tural credit com­mit­tees would en­hance col­lab­o­ra­tion and en­sure ef­fec­tive mon­i­tor­ing of the credit within in­sti­tu­tions. He also ad­vised banks to adopt an ef­fec­tive farm credit man­age­ment struc­ture, with in­te­grated re­port­ing lines of agri-credit teams to make agri-fi­nance a key in­di­ca­tor of banks' per­for­mance. The Gover­nor ap­pre­ci­ated the in­crease in agri-credit bor­row­ers of banks by 182,000, mainly due to in­clu­sion of bor­row­ers by the mi­cro­fi­nance banks.

Pak­istan is an agri­cul­ture-based econ­omy but in terms of pro­duc­tiv­ity its per­for­mance is dis­mal. Lately the gov­ern­ment is try­ing to bring im­prove­ment through bet­ter credit dis­burse­ment. Farm­ing is not only a prof­itable busi­ness with huge cash flows but it also con­trib­utes sig­nif­i­cantly to the gross do­mes­tic prod­uct. This sec­tor is a very vi­tal com­po­nent of Pak­istan's econ­omy and pro­vides es­sen­tial raw ma­te­ri­als to down­stream in­dus­tries in most of the cases. The sec­tor also con­trib­utes about 20 per­cent to the coun­try's GDP and re­mains by far the largest em­ployer ab­sorb­ing over 42 per­cent of the coun­try's to­tal labour force. Keep­ing in view the im­por­tance of this sec­tor in Pak­istan's econ­omy, the gov­ern­ment has lately been fo­cus­ing on im­prov­ing agri­cul­tural pro­duc­tiv­ity by sys­tem­atic ap­pli­ca­tion of bet­ter in­puts and ad­vance tech­nol­ogy, etc, which is not pos­si­ble with­out ad­e­quate pro­vi­sion of credit to the agri­cul­tur­ists who gen­er­ally do not have enough re­sources of their own to buy seeds, agri­cul­tural im­ple­ments, etc.

The SBP has now as­sumed the role of a fa­cil­i­ta­tor and de­vel­op­men­tal part­ner of fi­nan­cial in­sti­tu­tions to ac­cel­er­ate the growth of agri­cul­ture fi­nance in the coun­try. It has taken im­por­tant initiatives for im­prov­ing the ac­cess of fi­nan­cial ser­vices to marginalised farm­ers. Some of the re­cent initiatives of the SBP are "credit guar­an­tee scheme for small and mar­ginal farm­ers", "frame­work for ware­house re­ceipt fi­nanc­ing" and "guide­lines for value chain fi­nanc­ing". Com­mer­cial banks too need to con­cen­trate on agri­cul­ture fi­nanc­ing. The fi­nan­cial in­sti­tu­tions must strengthen their agri­cul­tural fi­nance poli­cies, in­crease ded­i­cated hu­man re­source, sim­plify lend­ing pro­ce­dures and work dili­gently for cre­at­ing mass aware­ness. It is a good sign that fi­nan­cial in­sti­tu­tions ex­tended Rs301.7 bil­lion worth of loans to farm­ers in the first six months (July-De­cem­ber) of the last fis­cal year, which is 43.1 per­cent of the in­dica­tive tar­get for the year. In FY16, banks dis­bursed agri­cul­tural credit of Rs598.3 bil­lion, which is nearly 100 per­cent of the over­all an­nual tar­get of Rs600 bil­lion and 16 per­cent higher than the dis­burse­ment of Rs515.9 bil­lion last year.

One can­not em­pha­sise too much the need for col­lab­o­ra­tion of banks and gov­ern­ment de­part­ments for the pro­mo­tion of agri­cul­ture credit, en­hance­ment of agri­cul­ture credit in­fra­struc­ture in un­der­served ar­eas and de­vel­op­ment of Shariah-com­pli­ant prod­ucts and ser­vices for meet­ing the fi­nan­cial re­quire­ments of clients. Banks should al­lo­cate both ge­o­graph­i­cal as well as sec­tor wise tar­gets and ex­pand farm credit in­fra­struc­ture, par­tic­u­larly in the un­der­served area. There is also a need for the de­vel­op­ment of a mech­a­nism for pro­vid­ing whole­sale lend­ing prod­ucts to mi­cro­fi­nance banks and in­sti­tu­tions to strengthen the out­reach of small farm­ers.

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