HBL to set up subsidiary to help improve agriculture output: CEO

KARACHI: HBL has obtained approval from the State Bank of Pakistan to set up a special subsidiary in the country, aiming to build capacity in the agricultural sector, its president and chief executive officer Muhammad Aurangzeb said on Monday.

Aurangzeb, speaking at the launch of the HBL’s Impact and Sustainability Report- 2022, said the bank received permission from the SBP two weeks ago to establish a special subsidiary called “Zarai” (agriculture), which will help small and medium-sized farmers improve their agricultural output.

The initiative aims to offer farmers a variety of facilities and services, including storage space, farming equipment, crop production inputs, including seed and fertiliser, and agronomic advice, according to HBL president.

“For the establishment of a subsidiary, we are awaiting approval from the Securities and Exchange Commission of Pakistan,” he added.

Despite creating a special subsidiary, the bank would still lend to clients for agricultural projects. However, Zarai will supply the non-financial services, while the farm finance will be managed on the HBL balance sheet, according to the bank’s CEO. “It is obvious that this will not be a CSR [corporate social responsibility],” Aurangzeb said.

He explained that the bank's top priority is agricultural financing, which is why the portfolio in 2022 hit an all-time high of Rs50.6 billion. HBL has contributed over Rs4 billion - spread over a decade - to the social uplift of Pakistan. In 2022 alone, the bank contributed over Rs580 million.

“Being Pakistan’s largest bank, we recognise this position comes with great responsibility. Our unwavering commitment to sustainability is enabling us to play a leading role in developing the agricultural sector and promoting food security through investing in relevant learning and infrastructure and making focused efforts on digitalisation as a means to achieve farmer convenience,” he said.

He said throughout the last six months, the country suffered uncertainties connected to the IMF programme, but that now that the country has secured an IMF loan, “there are many things that banks can do in terms of sustainable financing.”

The bank’s CEO added that the Water and Power Development Authority issued its first green 10-year Eurobond to generate $500 million two years ago. A number of foreign investors were drawn to the bond's introduction and offered WAPDA investments worth $3 billion, which was six times the required amount. JP Morgan served as the issuer's lead. Along with HBL serving as co-manager, the co-book runners were Deutsche and Standard Chartered.

With the bank’s vision for environmental protection and green financing, HBL has a ”No New Coal” Policy, which represents a very significant commitment by the bank towards reducing greenhouse gas emissions and is the first of its kind by any commercial bank in Pakistan, HBL said in the report.

In pursuance of HBL’s commitment to inclusion, sustainability, and community development, the bank is pledged to reducing its own emissions; expanding its green banking portfolio and its customer base to over 34 million including 4 million women; and contributing to the communities in which it operates by supporting healthcare, education, arts, and social development initiatives through the HBL Foundation, the report stated.

The bank aims to bring down its coal-related exposure to zero by 2030. Green financing In continuation of HBL’s focus on renewable energy initiatives, the bank’s funding and support enabled two wind projects and one solar power project to achieve commercial operations during 2022, according to the report.

“These projects provide 200 MW of clean and sustainable energy to the national grid. Supporting the Government’s objectives of growing solar power in the country, HBL is engaged in multiple solar IPP projects,” it noted.

Over the last year, HBL has also been mandated to establish a solar power project under a Bulk Power Consumer model, which will act as an enabler of similar projects in the future. Further demonstrating its focus across the renewable energy spectrum, the bank has secured a mandate to enhance hydropower potential and capacity for the Khyber Pakhtunkhwa province.