ISLAMABAD: State Bank of Pakistan (SBP) Governor Dr Reza Baqir on Tuesday said that only 25 percent of the total Rs1.215 billion disbursed by banks to the agriculture sector in the financial year 2019-2020, was given to the small farmers in the country.
The SBP governor, who attended the meeting via video link, while briefing the National Assembly Special Committee on Agriculture said that in the financial year 2019-2020, out of the total borrowers, 91 percent were small farmers but they only got 25 percent of the total amount disbursed to the agriculture sector by the banks.
He told the meeting, which was presided over by National Assembly Speaker Asad Qaiser, that there was a need to increase the share of small farmers in the total disbursement of loan.
The total number of agriculture loan borrowers is 3.74 million.
"Defiantly progress has been made with respect to agriculture financing but at the same time there is a lot of room for further improvement," he said.
Baqir said that he heads Agricultural Credit Advisory Committee (ACAC), which set targets of all banks about agriculture sector financing and also monitors it.
He said that the ACAC comprises representatives of all the banks, provincial government and other institutions.
"The SBP will provide all kinds of cooperation for the betterment of the agriculture sector," he said.
He said that currently electronic land verification was mandatory, therefore, like Punjab province; the same programme should also be started in the other provinces.
Such a programme will help in curtailing hurdles faced by banks in disbursing credit, he said, adding that electronic warehouse receipts will be considered eligible for farmers to get financing.
The SBP governor also said that there was a need to start warehouse mapping and the Ministry of National Food Security and Research (MNFS&R) could play an important role in that regard.
"We can increase credit towards small farmers by curtailing hurdles faced by banks," he said.
About incentive to farmers during the Covid-19, he said that Rs56 billion had been restructured after the spread of the coronavirus in the country, in which about 70 percent was agriculture-related barrowers.
Dr Aisha Ghaus Pasha said that agriculture was the best way for the revival of the economy.
She suggested that a separate scheme should be launched for small farmers because commercial banks were not ready to give credit to small farmers.
"In reality, small farmers are not attractive for commercial banks," she said.
She said that the SBP also needed to focus on Zarai Taraqiati Bank (ZTBL) as there were some operational issues of the ZTBL.
Baqir said that the SBP had prepared a detailed reform programme regarding the ZTBL and sent to the government for approval.
If we succeed in successful transformation of the ZTBL, then it can play an important role in the improvement of the agriculture sector, he said.
Muhammad Shahbaz Jameel, the ZTBL president, said that under agriculture package government had allocated Rs8.8 billion for reduction in mark up of agriculture loans to farmers.
If the mark up rate of agriculture loan is 12 percent then 10 percent will pay the government, he said, adding that the package is for a period of one year.
National Assembly speaker remarked that the ZTBL was standing on crutches and needed a cash injection.
To this, the SBP governor said that as far as cash injection was concerned, it be done through the shareholder and the shareholder was government of Pakistan.
Qaiser said that the capacity of the ZTBL should be enhanced to facilitate growers.
The committee's aim is to bring an out-of-the-box solution for the problems faced by farmers in the country because agriculture sector plays a central role in the economy as it contributes 18.9 percent to the Gross Domestic Product (GDP), he said.
However, there is wide gap between what agriculture contributes to the national economy and what it gets in terms of lending from formal sources.
He constituted a sub-committee, which will comprise representatives of the SBP, the Ministry of Finance, the MNFS&R and member of the main the committee on the matters of farmers' financial inclusion and economic development. The members of the committee highlighted that the lack of cheap loans precludes small farmers from improving their productivity and locks them into a low profitability value chain.
It was stressed that the State Bank of Pakistan should play an effective role to nudge the banking sector to increase lending to the agriculture sector.
They lamented that though farmers pay premium for insurance at the time of borrowing, however, they were never compensated in the case of natural calamities. The members also underlined the need for credit guarantee schemes, reducing the transaction cost of borrowing, treatment of the CPR as financial instrument, reforms of the ZTBL, and increased allocation for agri-loans. Syed Fakhar Imam, Minister for National Food Security and Research, Shandana Gulzar Khan, MNA, Malik Muhamamd Ihsan Tawana, MNA, Nawab Muhammad Yousaf Talpur, MNA, and senior officials of the MNFS&R and the SBP also attended the meeting.
Copyright Business Recorder, 2020
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