Tag: agriculture credit

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.

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.

KARACHI: The banks have disbursed an amount of Rs1.36 trillion as credit to agriculture sector during fiscal year 2020-2021, State Bank of Pakistan (SBP) said on Monday.

The central bank said that credit disbursement to agriculture sector had witnessed a growth of 12 per cent over the preceding fiscal year, despite the ongoing challenges posed by Covid-19 pandemic and climate change.

The disbursement is collective effort of 49 financial institutions which managed to achieve together 91 per cent of their assigned target of Rs1,500 billion for the year.

The outstanding agricultural credit stood at Rs628 billion as on end June 2021,witnessing a growth of over 8 per cent over end June 2020, complements the overall positive outlook of agriculture sector which grew at 2.77 per cent during FY21.

However, the number of agricultural credit borrowers witnessed a decline of 5 per cent, falling from 3.7 million in FY20 to 3.5 million in FY21, primarily due to limited outreach owing to ongoing pandemic.

During FY21, the commercial banks, specialized banks,and Islamic banks posted a satisfactory performance, by disbursing Rs1,210 billion, against their target of Rs1,277 billion, thus achieving 95 per cent of their assigned disbursement target. However, microfinance banks as a group achieved 73 per cent of their target by disbursing agricultural loans of Rs132 billion to small farmers. Likewise, the microfinance institutions/rural support programs collectively achieved 57 per cent of their target by disbursing Rs23 billion to small and marginalized farmers.

SBP, together with the government and private sector, made concerted efforts for the development and commercialization of the agricultural sector through provision of formal financial services.

Further, the proactive response by SBP to combat the threats posed by COVID-19 bolstered the economy and resulted in a rather quick rebound in economic activities across all major sectors including agricultural.

Besides, reducing the policy rate by 625 basis points, SBP also allowed banks to offer principal deferment and restructuring of agriculture loans to help combat economic disruptions.

As of April 2021, around 2 million borrowers in the agriculture and microfinance sectors have availed the deferred principal and restructured loan option with outstanding loans amounting to Rs132 billion.

SBP‘s programs and policy interventions addressed the cross-cutting issue of food security enabling regulatory environment, greater inclusion of women, and advancement in farm practices.

Further, SBP facilitated banks’ partnership with provincial Land Revenue authorities for the integration and use of automated land records for loaning. The government’s crop loan insurance and livestock loan insurance schemes also played an instrumental role in encouraging banks to provide loans to small farmers.

KARACHI: Banks have missed agriculture credit disbursement target for fiscal year 2019/2020 by Rs135 billion but the credit disbursement was 3.5 percent higher than the preceding fiscal year, State Bank of Pakistan (SBP) said on Monday.

The central bank in a statement said that the banks disbursed Rs 1,215 billion to agriculture sector during 2019-2020. This is 3.5 percent higher than the amount disbursed in the previous fiscal year but less than the credit target of Rs 1,350 billion which was set by Agricultural Credit Advisory Committee (ACAC) in Peshawar in November 2019.

Some factors which have constrained the growth of agriculture credit include the impact of COVID-19 pandemic, locust attack and continuing real side issues including water shortage, low production of cotton, sugarcane, low off take of fertilizers and volatility in prices of agri. produce etc.

The outstanding portfolio of agriculture credit increased to Rs 581 billion at end June, 2020, registering growth of 3.3 percent compared with the last year’s position of Rs 562 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 situation in the country.

The analysis of disbursement reveals that during FY 2019-20, five major commercial banks collectively disbursed agriculture loans of Rs 708.3 billion or 100.5 percent of their annual target of Rs 705 billion, specialized banks disbursed Rs 71.1 billion or 62.9 percent of their annual target of Rs 113 billion and fourteen domestic private banks as a group achieved 88.7 percent by disbursing Rs 225.0 billion against their target of Rs 253.6 billion.

Further, the five Islamic Banks as a group achieved 76.6 percent of their annual target of Rs 55.0 billion by disbursing Rs 42.1 billion which is 6.1  percent higher than the disbursement made during the corresponding period last year. Similarly, the Islamic windows of commercial banks disbursed Rs 43.5 billion or 79.2 percent against the target of Rs 55.0 billion in FY 2019-20 which is 33  percent higher from the disbursement of Rs 32.7 billion made during last year.

The agriculture credit of microfinance sector remained relatively sluggish due to COVID-19 lockdown in the 2nd half of FY 2019-20. The Microfinance Banks (MFBs) as a group have achieved 75.7 percent by disbursing agriculture loans of Rs 139.3 billion to small farmers which is 9.5 percent lower than the disbursement of Rs 154 billion during same period last year.

Likewise, the Microfinance Institutions/Rural Support Programs collectively achieved 73.4 percent of their targets by disbursing Rs 28.9 billion which is 15  percent lower than the disbursement of Rs 34 billion made during the last year to small and marginalized farmers.

It is important to mention that SBP announced a comprehensive relief package in collaboration with stakeholders for relief of agriculture sector to deal with the adverse implications of the ongoing pandemic on the farming community and agriculture business in the downstream of value chains. These measures which included deferment of principal and restructuring/rescheduling of agriculture loans were initially allowed uptill June 30, 2020 have been extended upto 30 September 2020.

SBP will continue to monitor the situation and it may introduce more measures to help the sector manage its finances during this temporary phase of disruption.

KARACHI: State Bank of Pakistan (SBP) has asked banks to enhance their efforts to achieve qualitative aspects of the assigned targets for agriculture financing.

While chairing the annual meeting of the Agricultural Credit Advisory Committee (ACAC) held in Peshawar, KPK, SBP Governor Dr. Reza Baqir highlighted that most of the banks met their assigned targets except for some of the banks including ZTBL, PPCBL, some of the domestic private banks and Islamic banks falling short of achieving their targets.

The province wise agriculture credit disbursement witnessed double-digit growth across all provinces and regions; however, banks struggled to achieve their assigned targets in the underserved regions.

He urged agriculture lending banks and institutions to scale up their efforts and commitment to ensure achievement of agriculture credit target in the underserved provinces and regions.

Dr. Reza Baqir appreciated the banks for their efforts in increasing the bank credit to the agriculture sector, which reached its historical high by end of FY19.

“It is for the first time in Pakistan’s history that credit to the agriculture sector has surpassed one trillion rupees,” he added.

The governor apprised the committee that SBP is considering three policy actions to further promote financial inclusion in the agriculture sector.

First, enhancing transparency through disclosure of bank wise performance statistics on monthly basis covering agriculture credit disbursement, geographic distribution, outstanding amount, number of borrowers, and agriculture credit infrastructure.

Second, introducing a comprehensive scoring model for ranking of banks against key agriculture credit indicators and targets. Third, introducing incentives and penalties based on performance scores of banks.

Dr. Baqir emphasized that there is a large scope for lending opportunities for banks that support both financial inclusion and banks’ profitability.

The keynote address was followed by a presentation wherein the performance of banks on agricultural financing was reviewed against their targets during FY19.

While assigning the agriculture credit target for FY20, it was shared that the overall disbursement target of Rs.1,350 billion has been assigned to banks which is 89 percent of the total estimated agriculture credit requirement of Rs.1,518 billion.

The province wise and sector wise distribution of the target was adopted while considering the provincial agricultural credit requirements, banks’ overall lending capacity and their business expansion plans. It was highlighted that Islamic banks and Islamic branches of commercial banks have been assigned disbursement target of Rs.110 billion in line with previous year to help realize the potential of Islamic agriculture financing. Further, the overall target of outstanding borrowers has been enhanced to 4.67 million with the addition of 650,000 new borrowers.

The Committee also deliberated on the new directions in agricultural financing by focusing on technology especially digitalization of agriculture loan processes through adoption of Land Record Information Systems, Electronic Warehouse Receipt Financing system, and landmark initiatives like Kissan Digital Portal, which are key priorities under the National Financial Inclusion Strategy 2023.

Subsequently, presentations were also made on i) Dairy value chain in Gilgit Baltistan by the Bank of Khyber, ii) Olive plantation and its value chain development by Pakistan Agricultural Research Council, iii) Innovative project to reclaim barren land by a progressive farmer, iv) Rural lending through digitization by HBL, v) Agriculture credit through alternative delivery channels by Khushhali Bank and vi) Opportunities for co-financing of PSDP projects through banks by Ministry of National Food Security.

While concluding the meeting, Dr. Reza Baqir encouraged all stakeholders to collaborate to enhance formal credit to agriculture. He urged the banks to enhance their efforts to achieve the regional targets assigned for the year.

Before closing the meeting, Governor-SBP thanked the participants and expressed his optimism that Banks will explore new investment opportunities through collaboration and experience sharing to achieve overall annual target for FY20 besides achieving their regional targets particularly in the underserved areas.

The meeting was attended by senior officials of federal & provincial governments, Presidents/CEOs of banks, members of all provincial chambers of agriculture, progressive farmers, representatives of KPK farming community and SBP officials.

KARACHI: The disbursement of agriculture loan has registered 21 percent growth to Rs1,174 billion in 2018/2019 as compared with Rs972.6 billion in the preceding fiscal year, State Bank of Pakistan (SBP) said on Monday.

However, banks have missed the disbursement target of Rs1,250 billion set by Agricultural Credit Advisory Committee for 2018-2019, the central bank said.

However, the achievement of agriculture credit disbursement is a sizable performance in agriculture lending despite number of demand and supply side challenges.

The SBP said that the agriculture outstanding portfolio increased to Rs 562.4 billion on end June, 2019 registering a growth of 20 percent compared with the last year’s position of Rs 469.4 billion.

Similarly, the agricultural credit outreach has increased to 4.01 million farmers or 91 percent against target of 4.42 million farmers at end June 2019, recording growth of 8 percent from 3.72 million farmers at end June 2018.

To achieve these numbers, SBP adopted a multifaceted strategy and made concerted efforts for pursuing a massive agricultural credit target which included; sensitizing banks to adopt agriculture financing as a viable business line, exploring new avenues of financing, value chain financing, mobilizing e-credit, warehousing receipt financing, implementation of crop/livestock insurance and credit guarantee schemes for the farmers etc.

The achievement could be made due to the integrated efforts of federal/provincial governments, SBP, financial institutions and other stakeholders.

Further, the efforts included rigorous follow up with the top management of banks and agriculture credit heads and conducting regular follow-up meetings with regional management were instrumental for target monitoring. Conducting regular farmers’ awareness & financial literacy programs across the country, initiation of one window operation in KPK and holding job fairs for agriculture graduates in underserved provinces were also helpful.

Moreover, the support of SBP BSC field offices in monitoring the district/regional targets was also supportive.

The detailed credit performance reveals that during FY 2018-19, five major commercial banks collectively disbursed agriculture loans of Rs 653.5 billion or 100.4 percent of their annual target of Rs 651 billion, specialized banks disbursed Rs 81.2 billion or 71.8 percent of their annual target of Rs 113 billion and fifteen domestic private banks as a group achieved 86.5 percent by disbursing Rs 211.9 billion against their target of Rs 245 during FY-2018-19.

Moreover, Microfinance Banks (MFBs) as a group have achieved 98.7 percent by disbursing agri. loans of Rs. 154.0 billion to small farmers which is 23 percent higher than the disbursement of Rs 124.8 billion during same period last year.

Similarly, the Microfinance Institutions/Rural Support Programs collectively achieved 97.1 percent of their targets by disbursing Rs 34.0 billion to small and marginalized farmers during FY 2018-19.

Five Islamic Banks as a group achieved 78.8 percent of their annual target of Rs 50.0 billion by disbursing Rs 39.4 billion which is Rs 23 billion higher than the disbursement made during the corresponding period last year.

Further, in order to mobilize the Islamic Windows of commercial banks for agricultural financing, the disbursement targets of Rs 50.0 billion were assigned for 2018-2019.

Accordingly, the windows of commercial banks as a group disbursed Rs 32.7 billion or 65.4 percent of the annual targets to faith sensitive clients during FY 2018-2019.

KARACHI: Banks have disbursed Rs527 billion as agriculture credit during first half of current fiscal year, which is 22 percent higher than the disbursement made during the same period of the last fiscal year.