Aug 11 - 17, 2008

The State Bank of Pakistan intends to expand the scope and coverage of agricultural credit to make it attractive both for commercial banks and farming community. Accordingly the private banks have been encouraged by the State Bank of Pakistan to get involved directly, through their syndicates with other banks or through Zarai Taraqiati Bank Limited, Rural Support Organizations and NGO's to disburse agri loans. However, it has also been noted that disbursement to the agriculture and non-agriculture sector in rural areas is around 40 percent only of the total estimated credit requirements.

The government has allocated Rs.200 billion for agriculture credit disbursements for the year 2007-08, which was 25 percent higher than the allocation of Rs.160 billion allocated in the FY 2006-07.

According to an official document, this credit provides financial resources to the farming community, particularly for purchase and procurement of primary inputs like fertilizers, seed, pesticides, machinery and equipment etc.

The government considers this credit as an important instrument, enabling farmers to achieve higher production and attaches high priority to ensure its timely availability to the farmers. With the advent of time and awareness, credit requirements of the farming community have shown an increasing trend over the years. In order to cope with the increasing demand for agriculture credit, institutional credit to farmers is being provided through Zarai Taraqiati Bank Limited (ZTBL), Commercial Banks, Punjab Provincial Co-operative Bank Limited (PPCL) and Domestic Private Banks.

The government had allocated Rs.200 billion, out of which:

Rs.96.5 billion were allocated to Commercial Banks

Rs.60 billion to Zarai Taraqiati Bank Limited

Rs.8 billion to Punjab Provincial Co-operative Bank Ltd.

Rs.35.5 billion to Domestic Private Commercial Banks


The agricultural loans amounting to Rs.138.6 billion were disbursed during the period July March, 2007-8 as against Rs.111.2 billion during the corresponding period last year, thereby registering an increase of 24.6 percent.


-The share of Zarai Taraqiati Bank Limited in supply of total credit by institutions decreased and was 28.6 percent during July March 2007-08.

- However, the share of commercial banks has surpassed the share of ZTBL. It was 47 percent of the total agricultural credit disbursed during July - March 2007-8

- While the above share of PPCBL has also decreased as it stood at 2.8 percent in the supply of total agricultural credit by institutions.

- The share of domestic private banks has increased as it was 21.6 percent of the total agricultural credit disbursed during July March 2007-08.


Dr. Shamshad Akhtar, Governor State Bank of Pakistan reported to the Agriculture Credit Advisory Committee (ACAC) the progress of banking sector in the delivery of credit to agriculture sector. According to her, the over-all credit disbursement to the agriculture sector during the first half of the FY 2007-08 (July December, 2007) has been good and based on achievements. She was optimistic that the indicative disbursement of Rs.200 billion will be achieved during the year 2007-08.

She informed that during the first half of F.Y. 2007-08 a total of Rs.90.3 billion has been disbursed to the agriculture sector as against Rs.71.7 billion disbursed in the corresponding period last year, thus showing an increase of Rs.18.6 billion or 26 percent. The over-all disbursement during July December 2007 is about 47 percent of the full year target and is in line with the percentage that was achieved in the corresponding period last year.

As is evident, the State Bank of Pakistan is working on a strategy to increase the flow of bank credit to rural areas including farms and non-farm sectors. According to an official of the Bank, the State Bank of Pakistan intends to push up agricultural credit to Rs.500 billion by the year 2011 from the target of Rs.200 billion fixed for the current fiscal year. It has also been assessed that based on prices of agricultural inputs better quality seed and modern agricultural implements and fertilizers Rs.500 billion credit in 2011 may also eventually prove to be in sufficient.


According to a press report, Sindh is gradually losing its share in agricultural credit, which is being attributed to the limited availability of farmers' pass-books, lack of co-operation by the provincial Revenue Department to verify these books, issuance of bogus pass-books and closure of the Sindh Provincial Co-operative Bank. The enhanced co-operation by the Sindh Revenue Department and automation of land records in minimum time could improve flow of funds to the agriculture sector in the province. The Government must come forward to help the farmers in this connection.

The position of Balochistan for attracting credit in-flow was quite dismal as in this province only 0.4 percent disbursement was made against the target of 1.5 percent of the growth. Bankers attribute this low agricultural credit demand in Balochistan to the combination of drought like conditions, which caused a slump in recovery of the loans, hence the problem in sanctioning of new loans.

In such cases the government's involvement is always necessary. In drought like conditions and when crops are destroyed by floods, frosts, locust or other natural calamities, the government must come to the rescue of the farmers and give them as much relief as possible besides ordering writing off the Bank loans.