SBP-led initiatives combine collateral-free loans, warehouse receipt financing, crop insurance and risk-sharing arrangements to improve access to formal credit for underserved farmers.
ISLAMABAD: The government has stepped up efforts to expand access to formal agricultural financing for small and underserved farmers across Pakistan through digital lending, targeted credit facilities, crop insurance and alternative collateral arrangements.
The initiatives, led by the State Bank of Pakistan (SBP) in coordination with federal and provincial governments, aim to reduce lending risks, address financing barriers and increase the flow of credit to the agriculture sector.
A major initiative is Zarkheze – Asaan Digital Qarza, launched on October 14, 2025, to provide collateral-free crop financing to small and subsistence farmers.
Under the facility, eligible landowners can obtain loans of up to Rs1 million, while tenant farmers can borrow up to Rs500,000. The loans are repayable within 12 months.
To ensure funds are utilised for agricultural activities, 75 per cent of the financing is disbursed in kind through verified agricultural merchants for purchasing essential inputs, while the remaining 25 per cent can be provided in cash.
Rs63.46 billion disbursed under youth loan scheme
The government has also expanded agricultural financing through the Prime Minister’s Youth Business and Agriculture Loan Scheme.
For FY2025-26, Rs65 billion was allocated to 21 banks for agricultural lending. By June 30, 2026, banks had disbursed Rs63.46 billion, representing approximately 97.6 per cent of the allocated amount.
Another important facility is Electronic Warehouse Receipt Financing, which allows farmers and commodity traders to obtain bank loans against agricultural produce stored in accredited warehouses.
Initially introduced for maize and rice, the facility was subsequently extended to wheat. Since its launch in February 2022, it has facilitated more than Rs15 billion in financing. During FY2025-26, banks disbursed Rs5 billion to 864 borrowers under the arrangement.
Digital land records to accelerate agricultural loans
The SBP is promoting the integration of digital land records with banking systems to simplify ownership verification and speed up agricultural loan processing.
In Punjab, 30 banks have been connected to the Punjab Land Records Authority’s system. Between July 2025 and June 2026, the system generated 143,583 land ownership documents, commonly known as fards, and created 43,786 charges.
The SBP has advised banks to integrate their agricultural lending branches with provincial land record systems by October 2026.
Meanwhile, the Punjab Land Records Authority introduced the Green Property Certificate through its Land Management Portal in June 2026, with integration into banking systems currently underway.
Expanded crop insurance and financial protection
The government has also strengthened insurance protection through the revised Crop Loan Insurance Scheme Plus, launched on April 20, 2026.
The revised scheme extends coverage to potatoes and introduces technology-based assessment of natural calamities through the Space and Upper Atmosphere Research Commission (SUPARCO). It also establishes a co-insurance consortium to strengthen the industry’s capacity to settle claims.
The scheme provides one-time income-loss support of Rs15,000 for male farmers and Rs17,500 for female farmers. Personal accident coverage has also been increased to Rs250,000 for male farmers and Rs275,000 for female farmers.
The federal government bears insurance premium costs for eligible borrowers under relevant crop and livestock insurance arrangements.
During FY2025-26, the Ministry of Finance reimbursed Rs1 billion in insurance premium claims under the Crop Loan Insurance Scheme and Rs140 million under the Livestock Insurance Scheme for Borrowers.
Banks offered incentives to finance small farmers
To encourage lending in underserved areas, the SBP has introduced a Risk Coverage Scheme for Small Farmers and Underserved Areas.
Under the scheme, banks receive first-loss risk coverage of up to 10 per cent on agricultural loans extended to small farmers in Punjab and Sindh and all farmers in the remaining provinces.
Banks can also receive a subsidy of Rs10,000 per borrower, linked to the net annual increase in their agricultural borrower base. The incentive is intended to offset the cost of bringing new farmers into the formal banking system.
The three-year facility will remain effective from FY2025-26 to FY2027-28.
Climate-smart agriculture financing
Climate resilience is another priority under the government’s agricultural financing strategy.
The SBP has engaged the Alliance for Financial Inclusion for technical assistance under an initiative launched in 2025. The programme aims to promote climate-smart farming, develop climate-risk profiles for agricultural lending, assess green banking guidelines and strengthen banks’ capacity to incorporate climate considerations into financing decisions.
Together, these measures represent a broader effort to modernise agricultural financing in Pakistan by combining digital credit, alternative collateral, insurance protection and climate-risk management.
The initiatives are expected to improve formal banking access for small farmers while encouraging financial institutions to expand lending to an agricultural sector that has traditionally faced significant financing constraints.