Commercial and specialised banks have surpassed the target of credit disbursement to the agriculture sector in the 2006-07 fiscal year, as the total disbursements grew by 22.4 percent to Rs 168.3 billion against the target of Rs 160 billion.
This was revealed in the annual meeting of the Agriculture Credit Consultative Committee (ACCC), held at SBP head office here on Tuesday. The meeting was chaired by State Bank of Pakistan Governor Dr Shamshad Akhtar. The meeting also set a target of Rs 200 billion-credit disbursement to the agriculture sector for the current fiscal.
Dr Shamshad Akhtar informed the committee that the commercial and specialised banks had surpassed the target of credit disbursement to the agriculture sector by issuing Rs 8.3 billion more credit as against the target of Rs 160 billion during the 2006-07 fiscal year.
The meeting was informed that five big commercial banks, including Allied Bank Limited, Habib Bank Limited, MCB Bank, National Bank of Pakistan and United Bank Limited had disbursed a total of Rs 80.2 billion, against the full-year target of Rs 80 billion.
In addition, the Zarai Taraqiati Bank Limited (ZTBL), Punjab Provincial Co-operative Bank Limited (PPCBL) and domestic private banks (DPBs) disbursed Rs 56.3 billion, Rs 7.9 billion and Rs 23.8 billion, respectively against the target of Rs 48 billion, rupees nine billion and Rs 23 billion during the last fiscal.
During the meeting, the committee noted the significant rise in credit and its absorptive capacity in Punjab as its provincial government had created a good environment and developed proper institutional arrangement for promoting the credit delivery.
For the 2007-08 fiscal year, the committee recommended the target of Rs 200 billion for credit disbursement to farmers. This includes combined lending of Rs 132 billion from the commercial banks and Rs 68 billion from specialised institutions, ie ZTBL and PPCBL.
The committee also recommended province-wise allocations of disbursements, based on the cropped area and absorption capacity of each province, Azad Jammu and Kashmir and Federally Administered Tribal Areas (Fata). During the meeting, Dr Akhtar constituted a committee to concentrate on additional groundwork, supportive to the rural development of the country.
These committees would focus on development of agricultural database in conformity with the international standards and development of methodology for proper estimation of the agriculture and rural credit requirements of the country in conformity with the overall agricultural production as set by the respective ministries.
The committee will also prepare a holistic development strategy for enhancing rural financing and to develop guidelines for lending technology and supportive credit enhancement mechanisms. The SBP Governor asked all stakeholders, including banks, relevant Federal ministries, and provincial government departments and farmers'' associations to make co-ordinated efforts to increase agricultural credit absorption capacity as otherwise it would be difficult for the banks to meet future targets of agricultural credit.
The committee was informed that the State Bank had developed a multi-pronged approach to double the outreach in terms of the number of borrowers and increase aggregate disbursements by banks of agricultural loans to meet up to 75 percent of the credit requirements of the sector from the existing 45 percent during next three to four years.
Dr Akhtar asked the commercial banks to focus on non-farm credit, which would not only enhance their credit portfolio, but would also help to generate employment in the rural areas. She stressed that banks, in consultation with other stakeholders, should develop new and innovative loaning products to cater to the demand of the sector.
The meeting was attended, among others, by senior officials of the State Bank of Pakistan, presidents and representatives of commercial banks, ZTBL and PPCBL, officials of Federal and provincial governments, chambers of agriculture, farmers'' associations and other stakeholders. Meanwhile, the SBP recommended a level playing field for all banks for the agriculture credit by bringing ZTBL and PPCBL on market-based systems.
Recommending some measures for further increasing the pace of growth of agricultural credit disbursement, the SBP Governor recommended periodic surveys and studies by the SBP, the Ministry of Food, Agriculture and Livestocks (Minfal) and the provincial agriculture departments to take stock of the implementation of ongoing initiatives to raise the agri credit.
Each bank, the SBP, Minfal, the provincial agriculture departments, extension services departments, revenue boards, Pakistan Agriculture Research Council (Parc) and other stakeholders should prepare individual activity plans (sub-strategies) along with timelines, duly approved at the highest level, and share the same with the SBP to ensure collaborative efforts, the SBP said.
The SBP stressed on the introduction of mandatory-crop loan insurance scheme and an effective implementation of the ADB agribusiness project for capacity building of banks in agribusiness lending. The SBP and Minfal should develop database-covering information on the basis of districts, farm or non-farm sector, agribusiness'', export markets, number of households, the SBP recommended.