The Agriculture Development Bank of Pakistan (ADBP)
is being converted into a public limited company in persuance of its
restructuring plan approved by the Federal government. The legal charter
of the bank has already been changed to facilitate this conversion and
the Securities and Exchange Commission of Pakistan is being moved for
its registration as a public limited company under the companies
The federal cabinet in its meeting presided by
President Gen. Musharraf, in early August, approved a plan to
restructure the administrative set up of the ADBP by converting it into
a public limited company with, Rs.10 billion equity. The Finance
Ministry drafted the restructuring Plan with the full backing of the
State Bank of Pakistan (SBP) and convinced the federal cabinet for the
bank's conversion into a limited company. The steps proposed by the
Ministry of Finance and approved by the cabinet for the conversion of
ADBP into a limited company are as follows:
An ordinance for the repeal of Agriculture
Development Bank Ordinance 1961 may be issued for which a draft of
Agriculture Development Bank of Pakistan (Reorganisation and conversion)
Ordinance 2002 vetted by the Ministry of Law and Justice which would be
After promulgation of the approved ordinance, the
Ministry of Finance would issue vesting order, specifying the effective
date and other relevant details for transfer for all assets,
liabilities, business and staff from lDBP to the new company.
The new company will have an equity of 10 billion
based on the following proposed financial arrangements.
The entire outstanding amount of the current
government loans to ADBP, about Rs.15.5 billion, will be transferred to
the equity of the new company.
The amount of about Rs.5.5 billion representing
claims of ADBP against the government for past remissions will be fully
provided for by the ADBP.
SBP's current equity holding of Rs. 3.204 billion in
ADBP will be converted into a "Subordinated Loan" to be repaid by the
new company on terms to be agreed with the SBP.
The existing negligible shareholding of the
provincial governments in ADBP will be transferred to the new company.
The decision aims at injecting necessary improvements
in the overall operations of the organization, thereby making it more
efficient in extending financial assistance to the farmers. The Cabinet
took a serious view of the huge defaults to the extent of 45 per cent of
the total loan portfolio of the bank in the agriculture sector. It is
true that the ADBP quite frequently came under criticism from its
borrowers or the farming class. The charges of corruption against its
officials in deciding on loan applications in addition to long delays in
the distribution of credit have been found to the quite common. However,
lately improvements have been reported to a large extent in the
performance of the bank officials due to introduction of one window
facilities offered to borrowers for different types of loan
All said and done, the bank's contribution in meeting
the financing requirements of the agricultural community, especially the
smaller farmers has been a major source of strength for the agriculture
sector over since the inception of the bank in the early 1950s. lt. may
be pointed out here that commercial banks in the country, operating as
they do on the basis of commercial considerations, understandably did
not like to deeply involved themselves in loan financing in agriculture
due to the low credibility of borrowers in this sector. As such, the
ADBP was the only source of loan financing for agriculture.
The conversion of the ADBP from a sub-ordinate
organisation of the governrment to a public sector corporation, it may
be pointed out, would not alter its basic status, and therefore, the
likelihood of any significant change for the better in its operational
efficiency can hardly be expected. The suggestion that the bank would be
made to operate within the parameters of commercial banking to lend
money on the basis of merits and demerits of borrowers in the
agriculture sector, means no radical change in practical terms. The
over-riding objective in the financing of agriculture sector should be
that all farmers without any exception, especially the smaller ones,
have an uninterrupted access to credit. Then alone the desired pace of
growth along with modernization in operations may be assured.
The management of the bank is however very optimistic
about its improved performance in future. According to them, the bank is
following a multi-pronged strategy to improve its working and financial
health. The recent announcement of a golden handshake scheme was one of
The chairman of ADBP is fully convinced that the
scheme has worked to the expectations and would help offload surplus
staff. Overstaffing in the bank had been a key issue and the management
thought that it was adversely affecting the banks performance. According
to the chairman, over 2000 employees have opted for retirement through
golden handshake scheme and a committee was reviewing all these cases.
The committee would submit recommendations to the chairman as soon as it
completes its job.
Chairman of the bank is confident that bank would
serve the purpose in a more effective manner once it gets the status of
a public limited company. The sole objective of revamping is to increase
its efficiency and pass on benefits to the farmers, he said. Responding
to another question at a press briefing he said the bank would approach
the State Dank for funds for payment to the beneficiaries of the scheme.
The Asian Development Bank (ADB) has offered the government financial
assistance for restructuring of the ADBP. It wanted an efficient bank to
cater financial needs of agriculture sector and enhance farm production.