Govt unveils Rs6.8bln in markup subsidy on agri-loans

ISLAMABAD: Government on Friday announced around seven billion rupees of mark-up subsidy on agri-loans that are expected to buttress 70 percent of farmers with smallholding in the lands magnate agriculture society.

The government in May announced a fiscal package of over Rs1.2 trillion in the wake of COVID-19 pandemic. Economic Coordination Committee of the cabinet division approved the package proposals.

Of this package, an amount of Rs6.861 billion has been approved for provision of financial relief in terms of markup subsidy on bank’s loans to the most deserving sub segment of farming community –farmers with land holding up to 12.5 acres, throughout the country, an official statement said.

More than 70 percent of the growers in Pakistan own land up to 12.5 acres, according to the official estimate. A markup subsidy of 10 percent on the loans would be extended or to be extended during the fiscal year of 2020/21.

All the loans with passbook as collateral are eligible to avail the subsidy. The government would bear markup of 10 percent on agricultural loan disbursed/to be disbursed to above mentioned sub segment of farming community and balance markup would be payable by the individual farmers on the loan amount availed from Zarai Taraqiati Bank Limited (ZTBL).

ZTBL, under a mutually agreed/predefined mechanism with the ministry of national food security, would pass on the involved subsidy to all the borrowers with 12.5 acres of land holding. The borrowers/farmers offering only collateral of agriculture land under pass-book would be entertained for subsidy. Farmers availing agricultural finance facility under any other collateral – residential /commercial property, gold, defense certificate and cash – would not be qualified for any relief under the package.

According to data of the Pakistan Bureau of Statistics, the economy has a heavy reliance on agriculture as about 24 percent of the country’s gross domestic product is made up of agriculture and the sector also employs almost half of the labour force employed in the country. Farmers rarely have access to formal finance and often borrow money through informal and exploitative means.

Stats, however, are revealing the uptrend in financial inclusion. Banks disbursed Rs1.174 trillion during the fiscal 2018/19. This was a significant 94 percent against the ambitious target of Rs1.25 trillion set by agricultural credit advisory committee for the year.

The disbursements increased 21 percent from Rs972.6 billion during 2017/18. Outstanding agriculture loan portfolio rose to Rs562.4 billion by the end of June registering a growth of 20 percent. That compared to Rs469.4 billion a year earlier.