Mar 16 - 22, 2009

The State Bank of Pakistan intends to expand the scope and coverage of agricultural credit to make it attractive for both commercial banks and farming community. Accordingly, the private banks have been encouraged by the State Bank of Pakistan to get involved directly in agriculture credit disbursement through their syndicates with other banks or through Zarai Taraqiati Bank Limited, Rural Support Organizations and NGO's.

However, it was noted that disbursement to the agriculture and non-agriculture sector in rural areas was around 40 percent only of the total estimated credit requirements. Therefore, it has been assessed that that the government needs to make available an additional amount of Rs.303 billion for agricultural loans to plug the gap between the supply and demand for improving productivity.

However, the government had 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 FY2006-07. It has, however, been estimated that the current credit requirement for agriculture sector in Pakistan, as mentioned above, is Rs.553 billion, while the available credit is Rs.250 billion for the fiscal year 2008-09, leaving a gap of more than 100 percent.

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, etc., prevailing prices of which are surpassing all limits.

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 provided through Zarai Taraqiati Bank Limited (ZTBL), Commercial Banks, Punjab Provincial Co-operative Bank Limited (PPCL), and Domestic Private Banks.

While the government has allocated Rs.250 billion for the year, 2008-09 as against Rs.200 for the preceding fiscal .year, according to a well informed resource, credit off-take by the agriculture sector rose by 10.16 percent in the first half of the current fiscal year: July 2008-December 2008 but still remained much below the target fixed for this period..

The State Bank of Pakistan has recently reported that credit to agriculture sector has reached Rs.99.448 billion as compared to Rs.90.277 billion during the same period last year.

Overall credit disbursement by the five major commercial banks including Allied Bank Limited, Habib Bank Limited, Muslim Commercial Bank Limited, National Bank of Pakistan and United Bank Limited amounted to Rs.48.635 billion during the six months: July-December, 2008 as compared to Rs.44.914 billion disbursed during the same period last year. This depicts an increase of Rs.3.721 billion.

Zarai Taraqiati Bank Limited, which is the largest specialized bank disbursed Rs.27.744 billion in the previously mentioned period of six months as compared to Rs.23.871 billion disbursed during the same period last year. Punjab Provincial Co-operative Bank Limited disbursed Rs.2.179 billion. Other 14 domestic banks (DPBs) loaned a cumulative amount of Rs.20.889 billion in the first half of the current FY09, which reflects an increase of 9.42 percent as compared with Rs.19.090 billion disbursed last year during the corresponding year.

The Stat Bank of Pakistan has set an indicative target of disbursement of Rs.250 billion during the fiscal year, 2008-09 for the agriculture sector, which is 25 percent more than the target for disbursement fixed for the fiscal year, 2007-08. However, as the actual disbursement made during 2007-08 was Rs.212 billion, it was higher by 18 percent than the indicative target.

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.250 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 and inadequate.


According to a press report, Sindh is gradually losing its share in agricultural credit, which is attributed to the limited availability of farmers' passbooks, lack of co-operation by the provincial Revenue Department to verify these books, issuance of bogus passbooks 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 during the fiscal year, 2007-08. 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. When drought like conditions, floods, frosts, locust, or other natural calamities destroy crops, 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.


No doubt agricultural credit plays an important and constructive role in increasing the agricultural productivity in developing countries like Pakistan. Zarai Taraqiati Bank Limited (ZTBL) formerly known as Agricultural Development Bank (ADB) of Pakistan is responsible to provide a major share of institutional credit to agriculture sector. In the beginning, a traditional farmer was shy to get credit against their lands and property as collateral. Moreover, even now a large number of needy people belonging to agriculture sector and rural areas, though willing and able to borrow, cannot avail credit facility because of procedural requirements and bureaucratic attitude, and lengthy and cumbersome lending procedure that favours influential vaderas, big landlords and people with political background. Small farmers are mostly neglected.

Some of the impediments and constraints for farmers to get bank loans are:

i) Some farmers still feel hesitant to apply for credit, as they do not want to mortgage their lands and properties as collateral. This is because of their ill-founded fears and apprehensions, which must be removed by the government agencies, especially the Agriculture Extension Service staff, Bank officials, and Revenue department by creating proper awareness in this connection.

ii) Low literacy is the major impediment, which needs to be addressed by increasing literacy in rural areas.

iii) Long distances of banks from the fields and houses of farmers: This problem can be addressed if Bank branches are opened in almost every union council area for the farmers to have an access to the banks.

iv) Time involved from the application to the disbursement of loan is usually lengthy and patience testing. Although the concept of "One Window Operation" is propagated, farmers have to take the trouble of running after the patwari/tehsil and the bank several times to get the loan. The procedure should be made simple, easier, and time saving to avoid unnecessary inconvenience to farmers.

v) Corruption: Payment of illegal gratification to patwari and even bank's people is something known as "compulsory evil". If this mal-practice is curbed, farmers may feel greatly relieved and comfortable. .

vi) Lethargy and red tape practices: Dismissive attitude in the government machinery and even in some banks is a great obstacle in getting credit by farmers interested to get agricultural loans. This also needs to be checked and controlled by superiors in authority.