SBP urges banks to increase agriculture credit disbursements

KARACHI: The State Bank of Pakistan (SBP) on Tuesday urged the banks to enhance their efforts to achieve qualitative aspects of the assigned targets in line with the strategic shift and key policy actions taken by SBP regarding agricultural financing, a statement said.

SBP Governor Dr Reza Baqir appreciated the banks for their efforts in increasing bank credit to the agriculture sector, which reached its historical high by end of FY19.

“It is for the first time in Pakistan’s history that credit to the agriculture sector has surpassed one trillion rupees,” he said in his keynote address.

He was chairing the annual meeting of the Agricultural Credit Advisory Committee (ACAC) held in Peshawar, Khyber Pakhtunkhwa as part of SBP’s continued efforts to enhance agriculture credit in the underserved provinces and regions.

He highlighted that most of the banks met their assigned targets except for some of the banks including Zarai Taraqiati Bank Limited (ZTBL), Punjab Provincial Cooperative Bank Limited (PPCBL), some of the domestic private banks, and Islamic banks, which fell short of achieving their targets.

The province wise agriculture credit disbursement witnessed double-digit growth across all provinces and regions; however, banks struggled to achieve their assigned targets in the underserved regions. He urged agriculture lending banks and institutions to scale up their efforts and commitment to ensure achievement of agriculture credit target in the underserved provinces and regions.

Dr Baqir apprised the committee that SBP was considering three policy actions to further promote financial inclusion in the agriculture sector.

The first was enhancing transparency through disclosure of bank wise performance statistics on monthly basis covering agriculture credit disbursement, geographic distribution, outstanding amount, number of borrowers, and agriculture credit infrastructure.

The second- introducing a comprehensive scoring model for ranking of banks against key agriculture credit indicators and targets. And the third, introducing incentives and penalties based on performance scores of banks.

Dr Baqir emphasised that there was a large scope for lending opportunities for banks that support both financial inclusion and banks’ profitability.

The keynote address was followed by a presentation wherein the performance of banks on agricultural financing was reviewed against their targets during FY19.

While assigning the agriculture credit target for FY20, it was shared that the overall disbursement target of Rs1,350 billion has been assigned to banks which was 89 percent of the total estimated agriculture credit requirement of Rs1,518 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 Islamic banks and Islamic branches of commercial banks have been assigned disbursement target of Rs110 billion in line with previous year to help realise the potential of Islamic agriculture financing.

Further, the overall target of outstanding borrowers has been enhanced to 4.67 million with the addition of 650,000 new borrowers.

The committee also deliberated on the new directions in agricultural financing by focusing on technology, especially digitalisation of agriculture loan processes through adoption of Land Record Information Systems, Electronic Warehouse Receipt Financing system, and landmark initiatives like Kissan Digital Portal, which were key priorities under the National Financial Inclusion Strategy 2023.