The State Bank has always been trying to encourage the financial institutions to increase the level of bank credit to the agriculture sector and has largely been successful in its efforts over the years. The latest report issued by the SBP on 8th August said that banks disbursed Rs 598.3 billion in agricultural credit during FY16, which were almost equal to the target of Rs 600 billion fixed for the year. The amount disbursed during the year was also 16 percent higher when compared with Rs 515.9 billion extended during FY15. The outstanding portfolio of these loans also rose by Rs 32.3 billion from Rs 313.3 billion as of end June 30, 2015 to Rs 345.6 billion at the close of June 2016. The number of farmers served by banks also went up from 2.2 million to 2.4 million during the year. A detailed review of banks' agriculture loan performance showed that five major banks collectively disbursed Rs 311.4 billion or 101.9 percent of their annual target of Rs 305.7 billion which was also much higher than Rs 262.9 billion disbursed last year. Among the five major banks, while NBP, HBL and MCB surpassed their targets at 109.2 percent, 102 percent and 101 percent respectively, UBL met its target and ABL could achieve only 87 percent of its target. Under specialised banks, ZTBL disbursed Rs 90.97 billion or 89 percent of its target of Rs 102 billion and PPCBL achieved 82 percent of its target by disbursing Rs 10.3 billion. Among other banks, the group of 15 domestic private banks achieved 93.4 percent of their target, nine microfinance banks surpassed the target by a huge margin of 34.4 percent and five Islamic banks also exceeded the target by disbursing Rs 8.5 billion as against the target of Rs 7.9 billion.
Although agriculture credit targets fixed by the State Bank were not mandatory but only notional, the mere fact that most of the financial institutions have been quite serious in meeting their targets speaks about the sincerity of their approach towards promoting agriculture sector of the economy. There is no denying the fact that agriculture sector is a vital component of Pakistan's economy as it provides raw materials to down the line industries, contributes about 20 percent of GDP; and it is by far the largest employer absorbing 42.3 percent of the total labour force of the country and caters to the food requirements of the growing population besides earning valuable foreign exchange for the country. Realising the importance of agriculture sector in the economy, the government is also trying to focus on systematic application of better inputs and advance technology, provision of high quality seeds, etc. A major relief package of Rs 341 billion was also announced by the Prime Minister of Pakistan for small farmers, including direct cash support and provision of soft agriculture loans. The overall objective of both the government and the SBP is to sustain a reasonable agriculture growth rate to support self-sufficiency and enhance overall GDP growth trajectory.
It needs to be noted, however, that though provision of adequate finance is a prerequisite to promote agriculture sector, it is not the only factor to affect productivity in this vital sector. There is a strong relationship between agricultural growth and weather conditions in Pakistan and pest attacks of various kinds have been quite common to harm the crop yields. Besides, quality of seeds is generally not up to the mark and extension services to guide the farmers are not up to the required standards. It means that agriculturists have various limitations in their farming practices translating into the fact that yield levels in Pakistan have been generally lower than in most of the other countries. Overall, it is encouraging to see that the financial sector is doing a good job by providing adequate credit to the agricultural sector despite various challenges, including low prices of major crops, depressed output, high risk perception about agricultural financing and recovery issues but much more needs to be done to increase the per acre yields of various crops. SBP's initiatives in the areas of financing agricultural sector, Credit Guarantee Scheme, Warehouse Receipt Financing and Value Chain Financing, though appreciable, are obviously not enough for attaining the desired objectives. It is about time that the government in particular took a holistic approach to the subject in order to remove most of the limitations impinging upon the productivity of agriculture sector. While the government and the banking sector are devoting their energies and resources towards uplifting the agriculture sector, it is also incumbent on farmers, particularly those whose incomes are above the minimum prescribed tax threshold, to contribute to the government exchequer by paying their due taxes.
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