SUPPLY OF AGRICULTURAL CREDIT

Farmers should be provided credit on easy rate of interest so that they may improve their land and increase production

By ASHIQUE ALI JOYO and Maj. BASHIR KHAN
Nov 01 - 07, 2004

Agriculture sector is backbone of Pakistan's economy, it contributes a lion share in GDP. Agricultural Credit is linked with the growth of agriculture. Agricultural credit has prime importance for the agricultural development. ZTBL formerly known as ADBP provides a lion share of the total credit disbursement followed by commercial bank.

Farmers in Pakistan are very poor due to low productivity. The propensity to save of the majority of farmers is low, therefore they need agricultural credit.

SOURES OF AGRICULTURAL CREDIT

TACCAVI LOANS

These loans are handled by the Provincial Revenue Department. Necessary funds are allocated for different areas each year in the provincial budgets. These loans are provided for specific purposes under the land Improvement Loans Act, 1889 and West Pakistan Agriculturist Loans Act 1958. Long term loans are provided for the following purposes.

(i) Construction and repair of wells, tanks and other works of storage, supply or distribution of water.
(ii) Preparation of land for irrigation.
(iii) Drainage reclamation from rivers, protection from floods, erosion etc.
(iv) Reclamation, clearance, enclosure etc of land for agricultural purposes.
(v) Such other works as the local government may from time to time declare to be improvements for the purposes of the etc.

CO-OPERATIVE CREDIT SOCIETIES

The cooperatives are oldest institutional source of farm credit in Pakistan. The performance of the cooperatives in the spread and utilization of credit to small farmers is not satisfactory. The loans are mostly utilized by big growers who have got their pocket societies registered with the cooperative Department. In 1904, the cooperative movement was sponsored in order to provide credit to rural sector through the cooperative societies. Act (1904).

The movement was the confined to only the credit sector in initial stage. In 1912, its scope was expanded by an amendment in the Act and other types of cooperative societies were also permitted to be formed.

Table 1
LOANS DISBURSED BY THE FEDERAL BANK FOR COOPERATIVES
FROM 1979/80 - 1987/88.

Year

Amount Rs' in million

1979-80

225.63

1980-81

393.00

1981-82

832.40

1982-83

1043.00

1983-84

1182.93

1984-85

1409.16

1985-86

1585.80

1986-87

2084.00

1987-88

2493.00

Source: GOP, Agricultural Statistics of Pakistan 1999-2000, Islamabad, 2000, P.191

It is pointed out from the table 1 that this bank extended more credit facilities to growers with free mark up which improved the financial position of the growers. But this facility was discontinued after 1987/88 due to Government policy.

ZARI TARKATI BANK LIMITED ZTBL (ERSTWHILE ADBP)

The ZTBL is the main credit supplier to the agricultural sector in the country. It was established in 1961 by the merger Agricultural Development Finance Corporation (ADFC) and Agricultural Bank of Pakistan (ABP). The ZTBL provides rural credit to the farmers through 51 regional offices, 354 branches and 1441 credit mobile officers (MCOs). In the Supervised Credit Scheme of the Bank is in-charge of 10 to 15 villages. The ZTBL advances loans on the basis of land mortgage or on personal security. Though the operation of ZTBL has reached 38,500 villages out of 45,000 yet the number of farmers availing of loan facilities (particularly the small farmers) is small It provides short, medium and long-term loans for farm and off farm activities. The details are given in table 2.

Table 2
TERM WISE POSITION OF AGRICULTURE CREDIT ADVANCED
BY ZARI TARKATI BANK LIMITED ZTBL FROM 1975/76 TO 1999-2000

Year

Short-Term

Medium- Term

Long Term

No. of cases in (00)

Total

No.of case in (00)

Amount

% age

No. of cases in (00)

Amount

% age

No. of cases in (00)

Amount

% age

1975/76

365

74.58

14.0

65

635.79

6.7

96

421.82

79.3

526

532.19

1979/80

160

89.10

12.6

63

48.75

6.9

95

571.99

80.5

318

709.84

1985/90

586

1297.34

24.9

211

810.49

15.5

259

3109.28

59.6

1056

5217.11

1989/90

489

2343.86

25.5

326

1378.52

14.9

301

5549.06

59.8

1116

9271.44

1994/95

1372

6197.52

43.0

270

1509.10

10.5

265

6692.99

46.5

1907

14399.61

1995/96

1066

6122.45

59.7

88

522.26

5.1

176

3615.79

35.2

1330

10,260.50

1996/97

984

5912.67

51.2

190

1808.84

15.5

122

3841.52

32.2

1296

11,563.03

1997/98

2716

14,020.55

63.4

361

2281.29

10.3

140

5826.13

26.3

3217

22,127.97

1998/99

3997

21,903.03

73.3

214

1359.05

4.5

223

6624.45

22.2

4434

29,886.53

1999/2000

3185

15,965.99

66.1

210

1247.18

5.2

267

6957.80

28.8

3662

24,170.97

Source: (i) Government of Pakistan, Agricultural Statistics of Pakistan 1990-91, Islamabad, 1991,P.167
(ii) Ibid, 2000-2001, Islamabad, 2002,P.157

COMMERCIAL BANKS

Commercial banks were inducted into the field of agriculture credit under the Banking Reforms Act of 1972. Commercial Banks also provide loan to the farmers. Table 3 explains the position of loans from 1982 to 2000.

Table 3
TERM-WISE LOANS ADVANCED TO FARMERS BY COMMERCIAL
BANKS IN PAKISTAN
FROM 1982/83 TO 1999/2000

(Rs. In Million)

Year

Short-Term

Long-Term

Total Amount Pakistan

 

Amount

% age

Amount

% age

1982-83

1902.33

89

245.59

11

2147.92

1983-84

3213.46

91

303.41

9

3516.87

1984-85

3837.27

91

401.46

9

4238.73

1985-86

4617.38

94

296.09

6

4913.47

1986-87

6240.69

93

441.85

7

6682.54

1987-88

4240.58

95

228.14

5

4468.72

1988-89

2355.59

91

241.70

9

2597.29

1989-90

2995.61

93

227.11

7

3222.72

1990-91

3126.89

81

734.90

19

3861.79

1991-92

3242.30

91

313.10

9

3555.40

1992-93

3886.13

92

356.25

8

4242.38

1993-94

3711.00

95

209.80

5

3920.80

1994-95

3772.10

94

237.60

6

4009.70

1995-96

4787.50

96

223.80

4

5011.30

1996-97

3932.20

97

125.30

3

4057.50

1997-98

5456.27

97

195.61

3

5651.88

1998-99

6732.89

94

420.56

6

7153.45

1999-00

8275.38

91

814.17

9

9089.55

Source: GOP, Agricultural Statistics of Pakistan, 1999-2000, Islamabad, 2001,P.184

TYPES OF AGRICULTURAL CREDIT

(I) SHORT-TERM CREDIT

The short-term credit ranges up to one year. The farmers need short term credit for meeting the working capital requirement of agriculture. For instance, they need short-term credit for the purchase of seeds, fertilizers, pesticides, bullocks and other is also raised for paying rents, revenue and also meeting the financial requirements of family. The short-term credit is repaid after marketing the produce of the next crop.

(II) MEDIUM-TERM CREDIT

The medium term loan extends from 1 to 5 years. The farmers require medium term credit for the purchase of cattle, purchase of implements, improvement in watercourse. The loan is obtained on the security of movable or immovable wealth of the farmers.

(III) LONG-TERM CREDIT

The duration of long term credit exceeds five years. The farmers need long term credit for making improvement of permanent nature in land, such as sinking of tube-wells, reclamation of land and building, purchase of machinery and implements, etc.

(IV) PRODUCTIVE CREDIT

Productive loans are those which increase the productivity and the income of farmers. For example the credit used on the purchase of seeds, fertilizer and tractors is a productive credit

(V) UNPRODUCTIVE LOANS.

These are those loans which do not increase the production and income of the farmers. For example the loan consumed on marriage is unproductive. See table 4.

Table 4
SUPPLY OF AGRICULTURE CREDIT BY INSTITUTIONS

Rs. in million

Year

ZTBL

Commercial Bank

Cooperatives Bank

Domestic Private Bank

Total Rs. Million

% Change

1997-98

22353.6

6109.7

4928.9

-

33392.2

-

1998-99

30176.0

7236.0

5440.0

-

42852.0

28.3

1999-00

24423.9

9312.5

5951.2

-

39687.6

-7.4

2000-01

27610.0

12055.0

5124.2

-

44789.2

12.8

2001-2

29108.0

17486.1

5273.7

578.5

52446.3

17.1

2001-02(July- March)

20161.8

11298.5

3107.3

434.6

35002.2

-

2002-03(July- March)

19346.5

14375.9

3217.8

679.3

37619.5

7.5

*ZTBL formerly ADBP
Source: Economic Survey 2002-03 GOP/Islamabad 2003 P-23.

Our farmers are mostly poor, due to low income so they can not utilize land properly.

Farmers should be provided credit on easy rate of interest so that they may improve their land and increase production by applying modern agricultural implements.