Banks urged to boost agriculture credit access

KARACHI: The State Bank of Pakistan (SBP) on Friday called on the commercial banks to concentrate on agriculture financing as farming is not only a viable business with huge cash flows but it also contributes significantly to the gross domestic product (GDP) with strong backward and forward linkages, a statement said.  “The SBP has adapted itself into the role of a facilitator and developmental partner of financial institutions to accelerate the growth of agriculture finance in the country,” said the central bank’s governor Ashraf Mahmood Wathra, while addressing the annual meeting of the Agricultural Credit Advisory Committee (ACAC) in Multan.

Taking his statement forward, Wathra asserted the financial institutions need to strengthen their agricultural finance policies, increase dedicated human resource, simplify lending procedures, rationalise lending rates, and work diligently for creating mass awareness. 

“The banks must develop other prerequisites for building lending portfolios and timely provision of credit to farmers and harness untapped potential of agri credit demand in the country,” he said. 

The SBP’s governor reiterated the central bank’s vision on financial inclusion and the ongoing efforts for broadening access to finance to the least served segments of the country. 

The meeting was informed that financial institutions extended Rs301.7 billion worth of loans to farmer in the first six months (July-December) of the current fiscal year, which is 43.1 percent of the indicative target of Rs700 billion for the year.  In FY16, banks disbursed agricultural credit of Rs598.3 billion, which is nearly 100 percent of the overall annual target of Rs600 billion and 16 percent higher than the disbursement of Rs515.9 billion last year.  

Giving their input the ACAC members proposed the need for collaboration of banks and government departments for promotion of agriculture credit, enhancement of agriculture credit infrastructure in underserved areas and development of Shariah-compliant products, and services for meeting the financial requirements of faith sensitive clients. The ACAC proposed that banks should allocate both geographical as well as sector wise targets and expand farm credit infrastructure particularly in the underserved area. According to the statement, the committee stressed the need for expediting the loan approval process by delegation of authority at branch/regional level. Besides, the committee also called for the development of a mechanism for providing wholesale lending products to microfinance banks and institutions to strengthen the outreach of small farmers.   

Later, the head of agriculture credit at financial institutions gave a briefing to the committee about the performance of banks on key indicators relevant to agricultural financing. The briefing covered important initiatives taken by the SBP for improving the access of financial services to marginalised farmers, while the participants deliberated on the way forward for credit enhancement in the underserved provinces/regions. Wrapping up the session on an upbeat note, the central bank encouraged the financial institutions to explore new markets, develop innovative products, increase use of alternative delivery channels, value chain financing, and create more linkages for improving livelihoods in the country.