Lending to farmers pleasing.

Byline: SHABBIR KAZMI

Agriculture loan

Agriculture contributes nearly one-fourth of the GDP of Pakistan. Over the years State Bank of Pakistan (SBP) has been increasing the lending target to farmers. Various schemes have been introduced for the financial inclusion of farmers, particularly small land holders. For the current financial year the Government of Pakistan has an indicative target of PKR2.25 trillion, which is a welcome sign.

For the last financial year (FY23) the SBP had assigned agriculture credit disbursement target of PKR1.8 trillion to meet the growing demand of funds by the farmers. Making the farmers financially strong is aimed at achieving food security.

The central bank set specific targets of PKR140 billion for production loans of wheat crop, PKR45 billion for tractor financing, and PKR20 billion for financing for harvesters, planters and other farm machinery under the overall target for FY23.

In addition, SBP has also enhanced the per acre indicative credit limits for agriculture financing to support the farming community to avail adequate financing from banks and optimize usage of agriculture inputs. With a view to ensure food security, per acre indicative credit limit for wheat was enhanced to PKR100,000 from PKR60,000 to facilitate the farmers to deploy quality inputs for achieving higher yields.

During FY22, the financial institutions managed to disburse PKR1.4 trillion to the agriculture sector as compared to the disbursement of PKR1.3 trillion during FY21 whereas the outstanding agriculture credit recorded an encouraging growth of over 10% and reached PKR691 billion by end June 2022.

The unprecedented disbursement and growth in agriculture credit portfolio was supported by various recent initiatives of SBP to promote agriculture credit and financial inclusion in the country.

One of the major recent initiatives of SBP was the introduction of a comprehensive agriculture credit scoring model to bring focus of banks towards improving qualitative aspects and regional distribution of agriculture financing in the country.

The model, adopted by the Agricultural Credit Advisory Committee, provided individual scores reflective of each bank's agriculture credit performance against a multi-dimensional criterion based on various indicators including sectoral disbursement, regional performance, outstanding amount, and outstanding borrowers etc.

However, growth in agriculture credit disbursement remained subdued due to various...