Karachi, August 9, 2023 – Financial institutions in Pakistan have disbursed a record-breaking Rs 1.78 trillion in agricultural financing during the fiscal year 2022-2023 (FY23). This amount represents an impressive growth of over 25% compared to the Rs 1.41 trillion disbursed in the previous fiscal year, FY22.
These financial institutions achieved 97.6% of the agriculture credit target set by the State Bank of Pakistan (SBP), which was Rs 1.82 trillion for FY23. The outstanding portfolio of agriculture credit also grew by 10% and reached Rs 760 billion by the end of June 2023, compared to Rs 691 billion in June 2022.
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The remarkable performance in FY23 can be attributed to the joint efforts of financial institutions and various initiatives undertaken, despite challenges like the 2022 floods, rising input costs, and monetary tightening in recent years.
SBP’s Champion Bank Model and Agriculture Credit Scoring Model played a pivotal role in assisting financial institutions in extending agriculture financing, especially in underserved areas. These initiatives contributed to significant growth in agriculture financing in FY23.
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The Agricultural Credit Advisory Committee (ACAC) also provided strategic guidance, coupled with rigorous monitoring by SBP, which further accelerated agriculture finance. In response to discussions in the ACAC meeting held in December 2022, Islamic banking saw substantial growth, addressing the needs of the farming community.
The Prime Minister’s Kissan Package played a pivotal role in boosting agricultural financing, particularly in flood-affected regions. The package included measures like waiving markup on small outstanding loans, interest-free loans for small farmers, and risk coverage for banks. Additionally, a subsidized scheme for purchasing farm machinery was introduced to encourage mechanization and ensure food security. Moreover, agro-based small and medium-sized enterprises (SMEs) were included in SBP’s Refinance Facility for Modernization of SMEs and Prime Minister’s Youth Business and Agriculture Loan Scheme. These initiatives provided affordable loans to the agriculture sector.
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SBP introduced an annual ranking of banks under the Agriculture Credit Scoring Model to promote transparency and competition among agriculture credit providers. This scoring model evaluates banks’ agriculture credit performance based on various criteria, emphasizing regional and sectoral performance. Introduced in FY22, the model has enabled banks to identify areas for improvement and focus on qualitative aspects to meet their targets.
