Post Source: DAWN By Shahid Iqbal
Wednesday, 19 Aug, 2009
KARACHI: Agriculture has become focal point of State Bank’s credit growth as the bank observed that the share of agriculture sector in banks’ credit was just 4.6 per cent while its contribution to Gross Domestic Product (GDP) was five times higher.
State Bank governor Salim Raza, while chairing the meeting of Agriculture Credit Advisory Committee (ACAC) on Tuesday, said that in spite of a structural shift towards industrialisation, the agriculture sector was still the largest sector of economy, having deep impact on socio-economic setup.
The SBP set an indicative target of Rs260 billion for agricultural credit disbursement for the current fiscal 2009-10.
‘It is the source of livelihood of at least 45 per cent of the total employed labour force in the country,’ said Mr Raza, adding that despite 22 per cent contribution in the GDP, agriculture sector has only 4.6 per cent share in banks’ credit portfolio which is not an encouraging picture.
He said that major chunk of the farm credit went to small farmers and their share rose to 63 per cent from 59 per cent. Last year (2008-9) agriculture sector credit target was Rs250 billion but only Rs233 billion could be disbursed.
The SBP governor asked banks to revamp and re-structure their agriculture lending mechanism by adopting modern and innovative techniques to boost agricultural financing.
In addition, the government needs to devise the policy for introduction of corporate and cooperative farming to enable the majority of (86 per cent of the total farms) farmers of the country to have the benefits of access to financial resources, new technology, quality inputs, marketing and storage facilities etc.
‘This would result in higher production and income to small farmers,’ he added.
Mr. Raza said that the SBP was working on development of a national crop insurance scheme, launching of pilot project for agriculture loans, credit guarantee scheme for small farmers, capacity building of banks, awareness of farming community, simplification of agriculture lending procedures, group based lending for small farmers, implementation of Benazir Zarai Card, introduction of Shariah compliant agriculture credit through Islamic banks etc.
Adequate availability and access to institutional credit is essential for accelerating the pace of agriculture development to ensure food security and poverty alleviation in the country, he said.
Mr Raza pointed out that high agriculture NPLs, cumbersome and lengthy lending procedures, issues of passbook and non-automation of land record; low yield, inordinate delays in payment of agricultural products by mills, ineffective implementation of government’s support price are the major bottlenecks in agricultural financing.
The focus on agricultural growth was not only for the development of the sector but also reflects that the poor industrial growth forced banks to shift their target.
The private credit growth during the entire 2008-09 was negative, showing the paralyzing picture of economy, other than agriculture which actually helped economy grow by two per cent.
The banks have vast opportunity to finance agriculture which has enormous potential to grow while financing gap is huge as share of agriculture sector in banks’ credit is still just 4.6 per cent.