KARACHI - State Bank of Pakistan (SBP) Governor Yaseen Anwar has urged upon the banks to adopt agricultural financing as viable business model through development of specific schemes and disseminate best practices through grass-root level programmes for farmers.
Presiding over a meeting of Agricultural Credit Advisory Committee at SBP, Karachi today, he said the relevant federal and provincial government departments, farmers’ representatives and other players in value chain also need to create credit absorption capacity of farmers through adoption of best modern farming practices, development of storage and marketing systems and resolution of other real side issues.
He said that heavy rains of 2011 and devastating floods in 2010 have greatly affected the national economy in general and agriculture sector in particular. The credit requirements of farmers have also increased significantly besides adjustment of existing agricultural loans, he said, adding that agriculture remains the mainstay with a contribution of more than 21pc to the GDP and around 60pc of the population depends on agriculture related activities for its livelihood.
SBP Governor said that banks need to develop a comprehensive agricultural finance policy for settlement, rescheduling and restructuring of loans of the affected borrowers in addition to provide fresh credits for the rehabilitation and revival of the economic activities in the affected areas. ‘The federal and provincial governments would also need to initiate support and relief packages for the affected areas’, he added.
Anwar said that in order to ensure timely and quick loan disbursement to help the agriculture sector and revival of economic activities in the affected areas, SBP in collaboration with banks has taken a number of initiatives including Refinance Scheme at discounted rates of 8pc coupled with Credit Guarantee Scheme for loss sharing of banks up to 40pc. ‘Banks were also allowed to restructure the existing loans and write-offs in cases where the recovery of loans is not possible’, he added.
He said the crop loan insurance scheme introduced by the government for production loans for five major crops has also supported the sector whereby claims of around Rs 800 million (including around Rs 550 million of the borrowers of ZTBL) have been settled by insurance companies in 2010-11.
He pointed out that agricultural credit is highly skewed towards farm sector i.e. around 68pc whereas credit to non-farm sector including livestock sector is only 32pc as compared with its contribution of 55pc to agriculture GDP.
SBP Governor announced the setting up of an Implementation Committee to ensure timely implementation of action plan prepared by ACAC Special Committee, constituted in December 2010. This Implementation Committee will be headed by the Executive Director, State Bank of Pakistan and include members from provincial agricultural departments, farmers representatives, Pakistan Banks Association (PBA), ZTBL and SBP Banking Services Corporation.
He said the initiatives of State Bank are important but the real benefits can only be reaped through collaborative efforts of all the stakeholders including banks, relevant departments of Federal and provincial governments and farmers representatives.
The meeting was informed the mid-year (July-December 2011-12) performance of agricultural credit remained satisfactory wherein, total disbursement registered an optimistic figure of Rs 125 billion which included additional Rs 5.5 billion by Microfinance banks as compared to the last year’s Rs 102 billion for the same period with 23pc overall growth rate.