Karachi, December 15, 2023 – The State Bank of Pakistan (SBP) has called on commercial banks to expand their reach and enhance their involvement in the agriculture sector, emphasizing the critical role this sector plays in the country’s socioeconomic development.
This advisory was issued during the annual meeting of the Agricultural Credit Advisory Committee (ACAC) held on December 14, 2023, in Lahore, chaired by Mr. Jameel Ahmad, the Governor of SBP.
Governor Jameel Ahmad underscored the importance of fortifying and stimulating growth in the agriculture sector, urging banks to ensure seamless, timely, and hassle-free access to financial services for farmers. This includes credit facilities, deposit services, and payment solutions. Recognizing the pivotal role of the agriculture sector, the Governor emphasized the need for collaborative efforts to bolster its resilience and contribute to the overall economic development of the nation.
Despite challenges, such as floods, the agriculture credit disbursements for the fiscal year 2023 reached an impressive level of Rs1,776 billion. This marked a year-on-year growth of 25.2% and achieved 97.6% of the overall target of Rs1,819 billion. Governor Ahmad commended the concerted efforts of banks, specialized banks, microfinance institutions, and other stakeholders for achieving these milestones, showcasing the sector’s strength and adaptability.
Governor Ahmad expressed optimism about the agriculture sector’s strong recovery, foreseeing a projected real GDP growth in the range of 2 – 3% in the fiscal year 2024. With this positive outlook, the disbursement target for the fiscal year 2024 was set at Rs2,250 billion, indicating a growth of 26.7% compared to the previous year. The growth of 30% during July-October 2023 instills confidence that the disbursement target is on track to be comfortably achieved.
Acknowledging challenges such as borrower attrition, the Governor announced that SBP would engage with each bank individually to develop plans and strategies for a sustained increase in agricultural borrowers. He urged banks to enhance their agrifinance capacity and establish partnerships with Microfinance Institutions (MFIs) to broaden the outreach of agriculture and rural finance services.
Governor Ahmad emphasized the critical need to improve farmers’ productivity and suggested collaborations with AgriTechs, Agricultural Universities, Provincial Agricultural Departments, and other agricultural stakeholders. Facilitating small farmers in selling their produce at competitive prices was highlighted, urging banks to connect them with large and reputable buyers.
The Governor underscored the importance of developmental loans, specifically directed towards the mechanization of the agriculture sector. He advised banks to assess the feasibility of financing agri-service providers, which offer agricultural machinery and equipment to farmers on a rental basis.
Recognizing Pakistan’s vulnerability to climate change, Governor Ahmad highlighted SBP’s green initiatives and called on the banking industry to proactively address climate change through risk mitigation tools and collaboration with international donor agencies. He envisioned an end-to-end automated agricultural financing ecosystem, emphasizing the transformative power of digital solutions. The Governor urged banks to fully embrace digitalization for processing agricultural loans, highlighting the imperative for all banks to integrate with the Punjab Land Records Authority’s Land Record Management Information System (PLRA’s LRMIS) by the end of June 2024.
The ACAC meeting, a longstanding annual tradition since the 1970s, brought together senior officials from federal and provincial governments, Presidents/CEOs of banks, members of provincial chambers of agriculture, representatives of regional farming communities, and senior officials of SBP. The collaborative efforts and insights shared at this meeting are expected to pave the way for a more robust and inclusive agricultural sector in Pakistan.
