Credit target of Rs1,250 billion for FY2019: SBP asks banks to bring qualitative shift in agricultural financing

KARACHI: Central bank on Saturday urged commercial banks to bring qualitative shift in agricultural financing by adopting innovative techniques for provision of easy and swift credit to small farmers.

Tariq Bajwa, governor State bank of Pakistan, at an annual meeting of Agricultural Credit Advisory Committee (ACAC) said the agricultural credit is one of the top priorities of government.

The meeting also assigned the agriculture credit target for FY2018-19. An overall disbursement target of Rs1,250 billion has been assigned to banks which is 82 percent of the total estimated agriculture credit requirement of Rs1,519 billion.

The province wise and sector wise distribution of the target was adopted while considering the provincial agricultural credit requirements, banks’ overall lending capacity and their business expansion plans.

It was highlighted that for the first time, Islamic banks and Islamic branches of commercial banks have been assigned disbursement target of Rs100 billion to help realize its potential. Further, the overall target of outstanding borrowers has been enhanced to 4.42 million with the addition of 700,000 new borrowers.

Bajwa said banks must continue to innovate and provide agri credit while adopting digital technologies, value chain financing, high value crops and create more linkages for improving livelihoods in the country.

“Banks must overcome their infrastructure gaps to achieve the annual agricultural credit target of Rs1,250 billion for FY2018-19. The target for FY 19 was not very steep compared to last year to allow the banks to bring a qualitative shift in agri financing,” he added.

Banks must enhance their advances to deposit ratio in all provinces and regions to support the local economies and also adopt, replicate and scale up the existing pilots on electronic land record management information system for efficient and timely provision of credit to small famers.

Bajwa appreciated the efforts of commercial banks, microfinance banks and microfinance institutions for nearly achieving the agriculture disbursement targets.

The banks disbursed Rs 972.6 billion, which was over 97 percent of the assigned target and 38 percent higher than FY 2016-17.

In terms of agriculture credit demand, banks met 72 percent of the total agri credit requirement compared to 57 percent in the last year.

Bajwa said the outstanding portfolio of agri credit also increased to Rs469 billion while serving 3.72 million borrowers at end June 2018. The agri lending banks/institutions added 450,000 fresh borrowers during the year.

“Most of the banks met their assigned targets; however, banks including ZTBL, PPCBL, some of the domestic private banks and Islamic banks fell short of achieving their targets,” the governor said.

The province wise agri credit disbursement witnessed double-digit growth across all provinces and regions, however, banks struggled to achieve their assigned regional targets in the underserved provinces/regions.

The governor urged agri lending banks and institutions to double up their efforts and commitment to ensure achievement of credit target in the underserved provinces and regions.

He asked the federal and provincial governments, revenue departments, farmers’ associations and other stakeholders to contribute in increasing crop productivity by adopting innovative farming techniques, providing modern cold storage and silos facilities, implementation of automated land revenue record and efficient irrigation systems to facilitate banks in their endeavor to adopt agriculture finance as a viable business.

“Besides providing an enabling regulatory environment, the SBP has been taking various developmental initiatives to boost agri financing at the grass root level,” governor said. “These included holding a number of awareness sessions all over the country and job fairs in collaboration with agriculture universities in the underserved provinces/regions.”

The governor emphasized that all banks should finalize the recruitment of the shortlisted candidates on priority basis and to take maximum benefit from the upcoming job fairs being planned by SBP in collaboration with agri universities.

The committee meeting deliberated on the new directions in agricultural financing by focusing on digitalization of agriculture loan processes, value chain and warehouse receipt financing, high value added crops, and provision of farmer advisory services and real time crop monitoring through Geographic Information Systems (GIS).