By Shahid Iqbal
Presiding over a mid-term review meeting of the Agricultural Credit Advisory Committee (ACAC), State Bank Governor Salim Raza said the share of agriculture credit in total banks’ credit has declined from 6.8 per cent in 2005 to 4.7 per cent in June 2009. The target of farm credit for the current fiscal year is Rs260 billion against an estimated overall credit requirement of Rs533 billion.
Mr Raza said that future economic growth during next four to five years and beyond will be led by the agriculture sector.
“If we want to have sustained growth, it will come through the development of the agriculture sector,” said the governor SBP, adding that the banks must seriously think about ways and means to increase farm lending.
The governor said the central bank was working on the development of a credit guarantee scheme for small and marginalised farmers, simplification of lending procedures and turnaround time, model Shariah compliant products for agriculture financing, development for markets for farm commodities through warehousing system and trading at National Commodity Exchange Limited. The warehousing system will facilitate small farmers to realise prices and avail banks’ collateralised credit through warehouse receipts.
The SBP governor said that the agriculture sector has shown an average growth of 4.5 per cent in the last five years and it provides livelihood to 66 per cent of the population.
However, banks’ credit to farmers has remained almost stagnant at 42-45 per cent of the credit needs of the farming community and approximately 2 million farm households against 6.6 million are being served, he pointed out.
He emphasised upon the banks to adopt group-based lending, wholesale lending to microfinance banks (MFBs), microfinance institutions (MFIs) and lending to small and marginalised farmers, who are in majority.
Banks should devise strategies for lending to farmers in livestock, dairy, and fisheries sectors and for developmental purposes including farm implements, water conservation and infrastructure, he said, and added that in this regard Habib Bank Ltd., National Bank of Pakistan and Askari Bank Ltd. have made some good progress.
The SBP governor said that the banks should establish close liaison with farmers’ associations for financial literacy and marketing of farm loan products and for the recovery of outstanding loans.
‘Similarly, farmers associations should also develop close linkages with banks, provincial agriculture and extension departments, input suppliers, agro marketing companies and arrange programmes to disseminate knowledge and skills to the farmers at grass root level, he added.
Referring to several initiatives taken by the State Bank for the promotion of farm financing, Mr Raza talked about launching of pilot project phase II for disbursement
of farm credit in 28 underserved districts, introduction of one window operation, and relief package for farm loans in NWFP and FATA, credit guarantee scheme for small farmers in war-on-terror affected areas
The measures also include refinancing facility for modernisation of rice husking mills and cotton ginning factories, training programmes for the officials of credit administration and risk management departments of banks.
The meeting was attended among others by heads of commercial banks, representatives of agriculture chambers and trade bodies, and officials of relevant federal and provincial departments.