Jan 28 - Feb 03, 2008

The State Bank of Pakistan has expanded the scope and coverage of agriculture credit to make it attractive both for commercial banks and farming community. Appreciably the entire value chain of agriculture sector covering inputs, agriculture machinery and equipment, production, storage, marketing, transport, processing of crops, fruit, vegetables (other than major crops) to the stage of distribution has been made eligible for agriculture credit under the supervised Agricultural Credit Scheme. The private banks have been encouraged by the SBP to get involved directly or through their syndicates with other banks or through Zarai Taraqiati Bank Ltd., Rural Support Organizations and NGO's.

The State Bank of Pakistan is endeavoring to make its policies and decisions in accordance with the credit requirements of the farming sector, which is increasing over the years because of the rise in the application of fertilizers, pesticides, and mechanization and the ever increasing costs thereof, however, disbursement to the sector is still around 40 percent of total estimated credit requirements of the farming community. It must be in the range of 70-80 percent during the next 3-5 years. The availability of credit will improve the resource capacity of farmers for purchase of agricultural equipment, implements and other inputs, for a favorable impact on farmers and productivity.

To fulfill the demand for agricultural credit institutionally credit is being provided to farmers through Zarai Taraqiati Bank Limited (ZTBL), Commercial Banks, Punjab Provincial Co-operative Bank Ltd. and Domestic Private Banks. According to the Ministry of Food, Agriculture and Livestock and State Bank of Pakistan, the Government of Pakistan had made an allocation of Rs.160 billion for agriculture credit disbursements during the F.Y. 2006-2007. This is a major milestone achieved towards this end for mainstreaming of agri-finance in the country's financial system.

Out of the total credit target of Rs.160 billion, following allocations were made to different banks and financial institutions:

Zarai Taraqiati Bank Limited

Rs.48 billion

Punjab Provincial Co-operative Bank Ltd.

Rs. 9 billion

Domestic Private Commercial Banks

Rs.23 billion

According to the facts and figures available, agricultural loans extended to the farming community during 9 months from July 2006 to March 2007 in different categories are as under:


An amount of Rs.104.8 billion was disbursed as agricultural loans during July 2006 to March 2007 as against Rs.91.2 billion during the corresponding period last year. The increase in the share of Zarai Taraqiati Bank Ltd. in supply of total agricultural loan was 32.9 percent as against 31.8 percent during the corresponding period last year. Noticeably, the share of Commercial Banks has excelled and exceeded the share of Zarai Taraqiati Bank Ltd., being 46.8 percent of the total agricultural credit disbursed during the aforementioned nine months of F.Y. 2006-07. The share of PPCBL has slight increase at 5 percent. The share of domestic private banks has increased being 15.3 percent as compared to 12 percent in the corresponding period of last year.


For the sake of facilitation, ease and comfort of small farmers, ZTBL has introduced a one-window operation scheme. This facilitates farmers to meet their needs for purchase of inputs during peak sowing season of both Rabi and Kharif crops in collaboration with the provincial governments, revenue officials and postal department authorities. It is desired that agriculture pass books may be issued at the spot to the interested new borrowers. Their land record is entered and all the required formalities are completed and loan is processed on the spot. It is disbursed by the bank on the next day. Steps are being taken to further improve "One Window Operation" to make it more effective in meeting the farmer's needs.


The revolving credit scheme launched by ZTBL is of three years duration with automatic renewal, one time documentation, partial repayments and annual clearing of accounts at the convenience of borrowers. Under this scheme credit requirements for inputs for the whole year is assessed and made available to the borrowers duly sanctioned by the managers, who are authorized to sanction loans up to Rs.0.5 million. During the period July-March, 2006-07 ZTBL has disbursed loans amounting to Rs.30.912 billion under this scheme as against Rs24.149 disbursed last year during the corresponding period, showing an increase of 28 percent.


Women are involved in agriculture since the times of Pharaohs and the participation of rural women in Pakistan in this sector has been assessed at 60 percent. Including women in the agricultural scheme may help a lot in poverty alleviation, household happiness and bringing about better outputs in agriculture. The ZTBL's major objective of this program is to make credit easily accessible to rural women through Female Mobile Credit Officers (FMCOs). Under this program, women are eligible to meet their credit needs through both Micro Credit & General Credit Schemes. In accordance with the report, 17 FMCOs are exclusively looking after credit needs of women in 17 branches of the Bank, while female borrowers may also obtain loans through male MCOs throughout Pakistan. An amount of Rs.99.572 million has already been disbursed under this program during July March, 2006-07. There is still a great scope to bring the rural female population in the fold of this credit program.


Micro-credit will be provided to small farmers through the Khushali Bank and Rural Support Program. Under this scheme of the ZTBL, all the Mobile Credit Officers working in the branches process micro credit cases both for men and women in cottage industries and income generating activities. 136 loan-able items have been specified under this scheme. All loans are to be repaid within 18 months of their disbursement. An amount of Rs.29.268 million was disbursed under this scheme during the period July March, 2006-07.


Ministry of Food, Agriculture and Livestock (MINFAL) and Zarai Taraqiati Bank Limited have launched this project to enhance and accelerate the efforts of the Government to boost productivity on sustainable basis. The project focuses on assisting the farmers to increase agriculture production. A total number of 109 villages are being covered under this project. Village Organizations (VOs) have been established in these villages, which organize the farmers and assist them with the collaboration of Agriculture Extension Staff for maximizing productivity by using proper inputs, water saving devices and modern agricultural technology. Small farmers owning up to 25 acres of land are eligible to receive loans from this project credit line through Mobile Credit Officers. An amount of Rs.371,403 million has been disbursed under this project during July March, 2006-07.


In a meeting of the Agriculture Credit Committee, the Governor State Bank of Pakistan commended all the banks that played a major role in achieving the target, which has shown a growth of 22.4 percent, with the total disbursement reaching Rs.168.3 billion over the preceding year's disbursement of Rs.137.5 billion.

Viewing the performance of the banks in this regard, it was observed with appreciation that Allied Bank Ltd., Habib Bank Ltd., MCB Bank, National Bank of Pakistan and United Bank Ltd. disbursed Rs.80.2 billion against the full year target of Rs.80 billion (ZTBL), Punjab Provincial Co-operative Bank Ltd., (PPCBL) and domestic private banks (DBPs) respectively disbursed Rs.56.3 billion, Rs.7.9 billion and Rs.23.8 billion against the targets of Rs.48 billion, Rs.9 bill and Rs.23 billion.


According to a report published in the print media in July, 2007, State Bank of Pakistan has set Rs.200 billion agriculture credit target for 2007 - 08 for credit disbursement to farmers, assuming a combined lending of Rs.132 billion by commercial banks and Rs.68 billion by specialized institutions.

Dr. Shamshad Akhtar, Governor State Bank of Pakistan told the committee in the annual meeting that commercial and specialized banks surpassed the targets of credit disbursement to the agriculture sector in the F.Y. 2006-07.


The Agriculture Credit Consultative Committee has noted the significant rise in credit and absorptive capacity in Punjab as the provincial government of Punjab has created a conducive and enabling environment for promoting credit delivery. At the same time it was desired that other provincial governments should also draw inspiration from the example of Punjab to set a supportive environment for credit delivery in their respective provinces. The Governor SBP asked all the stakeholders including banks, relevant federal ministries, provincial government departments and farmers associations to make coordinated efforts to increase credit absorption capacity.


The government should provide a level playing field to all banks by bringing ZTBL and PPCBL on market-based systems. It was also suggested in the meeting of the committee that mass media campaign and specialized incentives be provided to employees entrusted the tasks related to agri-financing/credit facilities for 3-5 years. Dr. Akhtar asked the commercial banks to focus on non-farm credit, which will help to generate employment opportunities in the rural areas. It was recommended that mandatory crop loan insurance scheme be started for effective implementation of ADB Agribusiness Project for the capacity building of banks in agribusiness lending. SBP and MINFAL were asked to develop a database covering information/data on the basis of districts, farm/non-farm sector, agribusinesses, export markets, number of households etc.


A good headway has been made in extending credit to agriculturists and rural population during 2006-07. Suitable allocation of agriculture credit target for 2007-08 amounting to Rs.200 billion has been made. Further expansion and judicious disbursements of the credit would need a periodical review and monitoring.

Mark-up rates on agricultural credit may be reviewed by the banks to reasonably reduce the same, keeping in view the market mechanism.

One window operation facility and other projects and schemes may be further improved to make them more effective to fulfill the farmers' needs.

The Government should organize training programs through the banks, MINFAL and SBP in all parts of the country on agricultural credit to create awareness among the farming community including female farmers, artisans and other concerned people in rural areas about availing the financing facilities and how to use these facilities productively and proficiently.

It is welcome that institutional credit will also be extended to non-farm sector including poverty afflicted rural populace, tenants/haris, agricultural artisans and other disadvantaged groups by organizing rural communities. These people also need to be educated through media how to avail the facility and how to benefit from it to the maximum. This awareness is necessary because of the widespread illiteracy prevailing in our rural population so that prospective borrowers may be able to improve their lot by judiciously utilizing this facility.