Jan 28 - Feb 03, 2008

The small farmers in Balochistan have no access to loan facility for making different types of improvements in the land, development of orchards, purchase of livestock, farm implements, machinery, tube wells and so on. The major reason of their financial exclusion has been their inability to provide collateral to the banks. Though they direly need finance at all stages of crop activity from sowing to spraying and harvesting, yet they are unable to meet adequate collateral requirement of the commercial banks. The lack of finance does not enable them to harvest and market their fruit crop and they have to give their orchards to contractors, who exploit them by earning a lot from their fruit crop and giving them a little amount for their labor.

Agriculture is the mainstay of provincial economy, as over 75 per cent of the population lives in rural areas. The rural economy of the province presents an eerie look of a low growth, low productivity, higher poverty and unemployment. The small farmers seem in a state of abject helplessness in the province. If the poor small farmers are supported by the government under different financing schemes, they would be able to increase fruit production and its exports from the province, which is already called as the fruit basket of Pakistan

INACCESSIBLE CREDIT: Muhammad Hasan Panizai, a small farmer from Khanozai in district Pishin told this scribe that whatever is being disbursed by banks in the name of agricultural credits, reaches hardly to the small farmers in the province.î We have no access to bank loans to meet our working capital requirementî. The local farmers generally abstain from resorting to the commercial banks for their needs, as they cannot meet their collateral requirement. Besides, obtaining loans is a process too complex for the local farming community, the payment of interest on loans is also considered as an ëevilí in the social and religious circlesî, he added.

Hasan told this scribe that the province produces millions of tones of fruits annually and development of horticulture in the province is subject to extending bank loans to the genuine farmers, who play the key role in enhancing the fruit production from Balochistan for export. It has also been observed that loans are obtained in the name of small farmers but used by the big farmers. This practice needs to be checked.

The local farmers are already cash-starved and reeling under a plethora of problems. For the last few years, the fruit crops in northern Balochistan have adversely been affected by scarcity of water, as tube wells were not operating fully and efficiently for power shortage. Apple has the most hard-hit fruit crop amid power and water crisis. The season for different varieties of apple in Pakistan starts from the first week of July and ends in mid of November every year and 70% of it is picked from Balochistan. Around 0.3 million apples are annually produced in the province. The recent drought spell also brought destruction to apple orchards.

In recent years, the power shortage caused a drought like situation in the province. Apricot and plum are high delta fruits, which are grown in upland Balochistan. Grape is a low delta crop and may be grown in all types of climates and soils. The province is famous for its grape production of commercial varieties. The grapes are grown in bulk in Quetta, Pishin, Kalat, Zhob, Loralai and Mastung districts, which are currently facing the problem of power shortage. The acute shortage of water due to frequent power break down has been playing havoc with these fruit crops.

LOAN FACILITY TO FARMERS: Balochistan has tremendous potential for development of horticulture, particularly the fruit farms. There is a need to realize and exploit tremendous potential and scope for expansion of export of fruits, which can become a big source of foreign exchange earning for the country. Perhaps the most important issue is how to extend and increase credit to small farmers for horticulture development in the province. During last three years, the State Bank of Pakistan has actively been engaged with the provincial governments and the representatives of farmers to trigger wider dispersal of rural credit.

This month, the SBP has developed a financing scheme under which the banks will provide loans to members of small farmersí group for crop and non-crop activities, based on their cash flow under joint cross guarantee of group members. Financing under the scheme will not exceed Rs200, 000 per borrower, which is within the clean lending limits of Prudential Regulations for Agriculture Financing. Under group-based lending programs, loans are given to individuals through a peer group. In this case, group members guarantee repayment of each otherís loans and collateral is generally not used, but peer pressure and collective responsibilities generated by the group take their place.

The SBP scheme covers all areas of the group-based financing methodology, including group formation, roles and responsibilities of members, bank and group coordinator, size and tenure of loans, documentation and other related matters. However, financing to small farmers under the scheme shall be subject to compliance with SBP regulations on agriculture financing.

HORTICULTURE POTENTIALS: Balochistan contributes countryís 90% production of grapes, cherry and almonds, 60% of peach, pomegranate, apricot and 34% of apple and 70% of dates. Thousands tons of apples are exported each year from Balochistan. Over 80% of the quality apples are produced in the province. Five years back, the drought hit the province and all the 26 districts except two were officially declared as calamity-hit areas. The growers of fruit crops in Balochistan faced the toughest time after destruction of their orchards and they had spent their savings on drilling work for tube wells, as the water table had declined to its lowest ebb.

Loan facility to the local farmers can help them face the critical situations in the calamity- prone province. The SBP has advised the banks to arrange insurance of the amount of loan disbursed for crop and non-crop activities and life insurance of the borrower to safeguard the interests of the borrower and the bank, in case of losses due to natural calamity or event beyond the control of the borrower. The banks have also been advised to ensure that the loans have been utilized for the same purposes for which they were obtained. No doubt, the SBP has developed a welcome financing scheme for the countryís small farmers but the scheme can only achieve its desiderata if its beneficiaries would be the genuine farming community.