Farm credit off-take much less than target

Post Source: Dawn – 25 Mar, 2010

By Shahid Iqbal

KARACHI: Agriculture sector, considered as the backbone of the economy, has absorbed much less credit than the target set by the State Bank during the first eight months of the current fiscal. The SBP reported on Wednesday that credit disbursement to agriculture sector during the eight months remained at Rs144.7 billion. Though it was 10.5 per cent higher than the disbursement of last year (Rs130 billion) but was far behind the target for the current fiscal.

The SBP fixed a target of Rs260 billion for the whole fiscal 2009-10, while during eight months the disbursement should be around Rs170 billion. The current disbursement is at least 20 per cent less than the target.

Analysts said the lower-than-target credit off-take by the private sector reflected a disappointing situation.

They said since the prices of agriculture input have gone up, the credit flow should be higher. They said diesel, urea, electricity prices and other farm inputs are much costlier than last year, which means more liquidity should be absorbed by the sector.

Analysts believe the area of cultivation must have been reduced because of scarcity of water, which would certainly hit the agriculture output during the current fiscal and this could be the one of the reasons for lower flow of agriculture credit.

The country depends largely on agriculture for its economic growth, including the largest textile sector, which earns about 60 per cent foreign exchange for the country.

The large scale manufacturing data shows that the sector is still struggling to come out from the negative zone, while the hope for any significant improvement this year is out of sight.

State Bank report also reveals that only the five large banks were making efforts to improve the disbursement to agriculture sector.

“Overall credit disbursement by five major commercial banks, including Allied Bank, Habib Bank, MCB Bank, National Bank of Pakistan and United Bank stood at Rs74.767 billion in July-Feb, 2010 compared with Rs62.632 billion same period last year, depicting an increase of Rs12.135 billion or 19.37 per cent,” said the SBP report.

The five large banks have already shown their monopolistic strength during the year 2009 as they earned 94 per cent of entire profits of the banking industry.

At least 13 small and medium sized banks are in trouble because of shortage of capital, which made them think to either sell out or merge with bigger bank. These banks are out from the agriculture sector, while the foreign banks were cautious to access the sector.

Other than five big banks, the Zarai Traqqiati Bank was the only large supplier of credit to the agriculture sector. It disbursed a total of Rs41.938 billion in July-Feb, 2010, up 9.14 per cent when compared with Rs38.427 billion in the same period last year, while disbursement by Punjab Provincial Co-operative Bank Limited stood at Rs3.441 billion compared with Rs3.464 billion last year.

14 domestic private banks also loaned a combined Rs24.557 billion during the period under review against Rs25.819 billion disbursed earlier.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: