Credit to agri­cul­ture

The Pak Banker - - FRONT PAGE -

Ac­cord­ing to the data re­leased by the State Bank of Pak­istan, bank lend­ing to the agri­cul­ture sec­tor rose to Rs972.6 bil­lion in FY18, an in­crease of 38.1pc over last year's Rs704.5bn.The dou­ble-digit growth dur­ing the fis­cal year highlights vast po­ten­tial for banks to pen­e­trate fur­ther into the sec­tor.The cen­tral bank noted that the achieve­ment of agri­cul­ture credit dis­burse­ment was a chal­leng­ing task in the back­drop of var­i­ous real side chal­lenges such as wa­ter short­age, low pro­duc­tion of maize and wheat, price volatil­ity and high cost of pro­duc­tion.Fur­ther­more, out­stand­ing port­fo­lio in agri­cul­ture sec­tor also in­creased by 15.6pc to Rs469.4bn dur­ing the 2017-1 Agri­cul­tural credit out­reach also widened to 3.7m farm­ers dur­ing the year, up 13.8pc from last year's 3.2m.

An anal­y­sis of agri­cul­ture credit dis­burse­ment re­veals that five ma­jor banks col­lec­tively dis­bursed Rs523.9bn (or 101.5pc of their FY18 tar­get of Rs516bn) up 52.9pc from Rs342.6bn dis­bursed in the pre­ced­ing year.Un­der spe­cialised banks cat­e­gory, Zarai Taraqiati Bank dis­bursed Rs83.2bn, achiev­ing 66.6pc of its an­nual tar­get of Rs125bn while Pun­jab Pro­vin­cial Co­op­er­a­tive Bank Ltd dis­bursed Rs10.7bn by achiev­ing 71.5pc against its tar­get of Rs15bn dur­ing the year.Fif­teen do­mes­tic pri­vate banks in to­tal achieved 92.4pc of their Rs200bn tar­get and five Is­lamic banks achieved 82pc of their cu­mu­la­tive tar­get of Rs20bn. The per­for­mance of Mi­cro­fi­nance Banks and Mi­cro­fi­nance In­sti­tu­tions was vis­i­bly en­cour­ag­ing which col­lec­tively sur­passed their an­nual tar­gets by dis­burs­ing Rs124.8bn and Rs28.7bn re­spec­tively to small farm­ers in 2017-18.

Ex­perts say that af­ford­able bank credit along with bet­ter avail­abil­ity of ba­sic in­puts such as fer­til­izer, seeds, pes­ti­cides and gov­ern­ment sup­port prices would pro­vide the needed sup­port to agri­cul­tural sec­tor. The SBP has al­ready adopted a long-term strat­egy to dis­burse max­i­mum amount un­der the agri credit to fa­cil­i­tate farm­ers, while banks are also mak­ing all-out ef­forts for their tar­gets fol­low­ing the SBP's guide­lines. The SBP is closely mon­i­tor­ing the banks' per­for­mance, be­sides fol­low-up of in­dica­tive tar­gets with the top man­age­ment of banks and their agri­cul­tural heads to achieve Rs 1 tril­lion tar­get. A de­tailed anal­y­sis shows that in ad­di­tion to tra­di­tional for­mal chan­nels, dis­burse­ments through mi­cro­fi­nance banks and in­sti­tu­tions are also pick­ing up pace

It may be noted here that in re­cent years SBP has made con­certed ef­forts to­wards achiev­ing the agri­cul­ture credit dis­burse­ment tar­get and im­ple­ment­ing var­i­ous bud­getary ini­tia­tives set by the gov­ern­ment.Some of these ef­forts, which were high­lighted in the SBP re­port in­clude the pro­vi­sion of en­abling reg­u­la­tory en­vi­ron­ment for agri­cul­ture lend­ing in­sti­tu­tions; sen­si­tis­ing banks to adopt agri­cul­ture fi­nanc­ing as a vi­able busi­ness propo­si­tion; ex­plor­ing new av­enues of fi­nanc­ing; value chain fi­nanc­ing; digi­ti­sa­tion of credit; ware­house re­ceipt fi­nanc­ing; and im­ple­men­ta­tion of credit guar­an­tee scheme for small and marginalised farm­ers etc.

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. It is good that farm­ers' credit needs are now be­ing met sys­tem­at­i­cally.

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