Farm credit offtake
Farm credit offtake has registered healthy growth recently, by as much as over 40 percent. Banks disbursed close to Rs 500 billion on account of agricultural credit during the first seven months (July-Jan) of the fiscal year. According to the State Bank of Pakistan, commercial banks, specialized banks, Islamic banks, domestic private banks, microfinance banks and microfinance institutions have cumulatively disbursed some Rs 499.645 billion during July-January of the current fiscal year compared to Rs 351.358 billion in the same period of last fiscal year (FY17), depicting an increase of Rs 148.287 billion.
This year the State Bank has set an all-time high target of Rs one trillion of credit disbursement for FY18 compared to Rs 700 billion for FY17. The set target is some 43 percent higher than previous year. Encouragingly, banks have also achieved 50 percent of the overall annual target of Rs 1 trillion. With fresh disbursements, the outstanding portfolio of agri loan also increased to Rs 444.465 billion by the end of January 2018 compared to Rs 367.547 billion at the end of January 2017. 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, particularly Rabi crop.
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. It is a good augury that SBP is closing monitoring the banks' performance, with follow-up of indicative targets with the top management of banks and their agricultural heads. A detailed analysis shows that in addition to traditional formal channels, disbursements through microfinance banks and institutions are also picking up pace. Five large banks collectively disbursed agri loans of Rs 255.209 billion or 49 percent of their annual target in JulyJanuary of FY18. Under specialized banks, ZTBL disbursed Rs 42.569 billion (34 percent of its annual target) and PPCBL achieved 37 percent of its target by disbursing Rs 5.616 billion during the period under review.
Remarkably, a group of fourteen domestic private banks achieved 50 percent of the target and disbursed some Rs 100.27 billion in first seven months of this fiscal year. Five Islamic banks disbursed agri loans of Rs 8.745 billion or 43.73 percent of their annual target of Rs 20 billion during the period under review. Eleven microfinance banks disbursed Rs 71.08 billion and achieved 71 percent of annual target of Rs 100 billion. Microfinance Institutions achieved 64 percent of the target with Rs 16 billion agri credit disbursement.
The farming sector is a very vital component of Pakistan's economy and provides essential raw materials to downstream industries. Farming is not only a profitable business but it also contributes significantly to the gross domestic product. 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. In this context, more attention needs to be given to expanding banking and related facilities to meet farmers' credit needs.