Agriculture credit up 3.5pc to Rs1.21trln in FY20

KARACHI: Banks loaned Rs1.215 trillion to agriculture sector in FY2019-20, which is 3.5 percent higher than previous fiscal year, but less than the target of Rs1.350 trillion set by Agricultural Credit Advisory Committee (ACAC) in November 2019, latest numbers showed on Monday.

The banks had lent Rs1.174 trillion to over 4 million farmers during the last fiscal year (FY19). This stunted growth can be attributed to the impact of COVID-19 pandemic, locust attack and continuing real side issues like water shortage, low production of cotton, sugarcane, low off-take of fertilisers, and volatility in prices of agricultural produce etc.

According to State Bank of Pakistan (SBP) statistics, the outstanding portfolio of agriculture credit increased to Rs581 billion at the end of June, 2020, registering a growth of 3.3 percent compared with the last year’s position of Rs562 billion. However, the number of agriculture borrowers declined from 4.01 million at end June 2019 to 3.74 million at end June 2020 due to the COVID-19 lockdown in the country.

During fiscal year 2019-20, five major commercial banks collectively disbursed agriculture loans of Rs708.3 billion or 100.5 percent of their annual target of Rs705 billion, specialised banks disbursed Rs71.1 billion or 62.9 percent of their annual target of Rs113 billion and fourteen domestic private banks as a group extended Rs225 billion achieving 88.7 percent of their target of Rs253.6 billion. Further, the five Islamic banks as a group achieved 76.6 percent of their annual target of Rs55 billion by disbursing Rs42.1 billion which is 6.1 percent higher than the disbursement in the corresponding period last year. Similarly, the Islamic windows of commercial banks disbursed Rs43.5 billion or 79.2 percent of the target of Rs55.0 billion in FY20, which is 33 percent higher than Rs 32.7 billion last year.

The microfinance sector’s agriculture lending remained relatively sluggish due to COVID-19 lockdown in the second half of FY20. The Microfinance Banks (MFBs) as a group disbursed Rs139.3 billion to small farmers, 75.7 percent of their target, which is 9.5 percent lower than Rs154 billion lent in the same period last year. Likewise, the Microfinance Institutions/Rural Support Programs collectively achieved 73.4 percent of their targets by disbursing Rs28.9 billion, which is 15 percent lower than the disbursement of Rs34 billion during the last year to small and marginalised farmers. The central bank had announced a comprehensive relief package in collaboration with stakeholders to help agriculture sector deal with the adverse implications of the ongoing pandemic on the farming community and agriculture business in the downstream of value chains.