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July 12, 2020

‘Agriculture, livestock proved the most pandemic-resistant sector’

Business

July 12, 2020

ISLAMABAD: Proving their resilience in one of the worst economic slowdowns, agriculture and livestock sector fared far better than services and small-scale manufacturing sectors during the COVID-19 pandemic, which crippled the latter, a top microfinance official said.

Yasir Ashfaque, Chief Executive Officer of Pakistan Microfinance Investment Company (PMIC), in an exclusive interview with The News this week, said there was a potential of 22 million customers of microfinance sector in Pakistan but so far only 7.2 million beneficiaries had availed facility.

Pakistan Microfinance Investment Company (PMIC) has disbursed 35.7 percent micro loans for agriculture/livestock sector out of total outstanding portfolio of Rs 24.05 billion.

“The bigger challenge for small farmers is the locust attack in Sindh and Punjab and it could have serious implications for the rural economy if it is not curtailed at the earliest,” Ashfaque said.

He added that out of the total outstanding portfolio, the livestock/poultry sector’s borrowing share stood at 30.2 percent, agriculture 5.5 percent, trade 25.8 percent, services 20.6 percent, manufacturing/production 9.7 percent, and rest all the remaining other sectors.

He said they were focusing on certain number of Sustainable Development Goals (SDGs) to align with the global agenda.

When asked about administrative cost of PMIC, he said it stood at 1.4 percent and was aligned with national and international standards.

Ashfaque said the PMIC adopted Value Chain approach to bring product from producer to the final consumers. “We provided the platform for bridging gaps and creating connectivity,” he added.

He explained they prepared profiling of farmers to collect data about farmers’ crop cultivation practices and used to design trainings accordingly. “Then increased financial independence, provided them insurance coverage, created linkages,” he said.

The PMIC team implemented the value chain approach in a number of districts in Pakistan including Bhawalpur, Gujranwala, Sheikhupura and Nankana Sahib whilst working with small scale farmers. These value chains have been pivotal in increasing crop yield of subsistence farmers of wheat, rice, and cotton, helping them improve their income level. Various public and private sector entities have been engaged over time in this process.

Then PMIC engaged private sector entities such as Fauji Fertilizer Company and Center for Biosciences International and as a result overall 23,000 subsistence farmers benefited from this scheme.

This value chain scheme, he said, reduced per acre input cost by 16 percent, productivity went up by 21 percent and provision of large size loan of up to Rs60,000 resulted into reduced dependence of farmers on middlemen.

Ashfaque said the agriculture/livestock could become major source of potential for boosting up Pakistan’s economy in the aftermath of COVID-19 pandemic.

PMIC is a national-level apex institution for microfinance providers in the country. PMIC was established in 2016 as an important pillar of the National Financial Inclusion Strategy (NFIS) formulated by the Government of Pakistan. PMIC has been set up to catalyse and lead the next phase of growth in the microfinance sector of Pakistan.

Replying to a query about COVID-19’s impact on microfinance industry, he said similar to any major disaster, this pandemic had an adverse effect on the microfinance industry as well as the end customers. “Due to the lockdown, economic activity came to a halt, causing closure of means of livelihood and loss of income for a majority of microfinance clients,” said he.

However, he said, the most affected were the micro and small enterprises as most of these borrowers have faced income losses and were forced to use their savings to purchase food for their families. “However, geographically, it has been observed that districts with dependence on agriculture have been able to deal with COVID-19 better as compared to districts with strong reliance on manufacturing and on micro and small enterprises,” the PMIC chief said.

The clients running small shops, hawkers, traders, tailors, saloon and parlors, as well as daily wagers were most affected due to the pandemic initially, he said.

“Clients in livestock and crop sectors have not been affected as adversely due to COVID-19 as services and small-scale manufacturing,” he said adding, “The milk and meat shops were open; the only notable issue livestock farmers had faced was the closure of local cattle markets”. However, as the lockdown restrictions were eased, a surge in demand was observed in restaurant orders, which helped increase demand, he said.

“Further, farmers engaged in crop cultivation continued to cultivate crops in rural areas, as these activities do not require close contact with other people, resulting in reduced COVID-19 cases in respective areas. In addition, government’s timely decision to procure more wheat this year, at higher price than last year, resulted in increased incomes for subsistence farmers,” Ashfaque said.

“We have constantly remained in touch with our borrowers acting as bridge to facilitate communications among MFPs, sharing of global knowledge and best practices through publications, webinars, teleconferences, calls and social media.”

PMIC has also been in negotiation with international development institutions and local lenders and commercial banks to develop new products and financing structures like Credit Guarantee Instruments, emergency loan and similar other products that could provide liquidity to the sector in the future.

“We are also actively engaged with government department and regulators for policy level interventions to support clients and MFPs during these testing times.

As a small gesture of our contribution to National relief efforts, the PMIC team contributed 1 day’s salary to the Prime Minister’s fund,” he said.

He said Ehsaas program provided much-needed relief to the deserving, but in the long run families would require consistent financial income to fulfill their basic needs. “The program uses very effective Poverty Score Card as an instrument to determine poverty levels; however, most microfinance clients as a result of their businesses and assets do not fall within the eligible limits set for cash payout under Ehsaas,” Ashfaque said.

He added that loss of business and income during the lockdown resulted in a number of clients to fall below the poverty line but since they were not registered under the National Income Support Program, they were not considered for the initial round. Many MFPs have facilitated these individuals in the registration process, he said.