Farm sector gets Rs1.1 trillion loans in H1, nears half of annual target

KARACHI: The financial institutions lent Rs1.106 trillion to the agriculture sector in the first half of the 2023/24 fiscal year, reaching nearly half of the annual target set by the central bank, official data showed on Wednesday.

The loans, which were disbursed from July to December, mainly benefited the livestock, dairy and poultry sectors, the State Bank of Pakistan said on its X account.

The central bank has set an indicative agriculture credit target of Rs2.25 trillion for the 2023/24 fiscal year.

“In the first half of FY24, financial institutions disbursed loans of Rs1,106 billion in the agriculture sector, achieving 49 percent of the annual indicative agriculture credit target of Rs2,250 billion set by SBP,” the SBP said. “Major beneficiaries were livestock and dairy, crops and poultry sectors.”

The SBP reports that from July to December of FY24, banks—including specialised and microfinance banks—and microfinance institutions lent Rs271 billion to the livestock industry, Rs246 billion to the crop, Rs174 billion to poultry, and Rs415 billion to other sectors.

The central bank has set farm credit disbursement target of Rs2.250 trillion for the financial institutions for the current fiscal year to meet the demand for such loans and to promote growth in the agriculture sector of the country. Despite various challenges, including floods, banks were nonetheless able to lend farmers Rs1.776 trillion in FY2023. These loans showed a year-on-year growth of 25.2 percent and met 97.6 percent of the total target of Rs1.819 trillion.

The government expects Pakistan’s economy to rebound in the fiscal year 2024, growing by 2–2.5 percent due to the better performance of the agriculture sector.

The SBP, in its latest monetary policy statement, showed optimism about the strong recovery in the agriculture sector, paving the way for a projected real GDP growth in the range of 2-3 percent in FY24.

“Keeping in view improvement in output of Kharif crops, the prospects of Rabi crops seem robust owing to better input conditions,” the SBP said.

Analysts believe that increasing farmers' output is essential to making them a more attractive risk for banks.

To increase farmers' produce, banks must work with agricultural stakeholders to provide high-quality inputs, enhance farming practices, and make the best use of agri-tech.

Acknowledging the critical role that digitalization plays in success, the SBP stressed that by the end of June 2024, all banks must fully use the Land Record Management Information System of the Punjab Land Records Authority in order to process agricultural loans. Additionally, the SBP recommended that other provinces and regions accelerate the digitization of their land records to facilitate integration with banks for quick loan processing.