Credit to agriculture
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.