RECORDER REPORT
KARACHI (March 03 2010): State Bank of
Pakistan Governor Salim Raza has prodded
banks to revamp and restructure their agri
lending mechanism through innovative
products, and adoption of international best
practices. Presiding over mid-term review
meeting of the Agricultural Credit Advisory
Committee (ACAC) at the State Bank of
Pakistan, Karachi on Tuesday, he said that
future economic growth, during next four to
five years and beyond, would be led by the
agriculture sector.
"If we want to have sustained growth, it
will come through development of the
agriculture sector. Banks must seriously
think about ways and means to increase agri
lending," he asserted. He emphasised upon
the banks to adopt group-based lending,
wholesaler lending to micro-finance banks (MFBs),
micro-finance institutions (MFIs) and
lending to small & marginalised farmers who
are in majority.
Banks should devise strategies for lending
to farmers in LIVESTOCK, DAIRY, fisheries,
etc, and for developmental purpose,
including farm implements, water
conservation and infrastructure, he said,
and added that in this regard Habib Bank,
National Bank and Askari Bank had made some
good progress.
The SBP Governor said that banks should
establish close liaison with farmers'
associations for financial literacy and
marketing of agri loan products and for the
recovery of outstanding loans. "Similarly,
farmers' associations should also develop
close linkages with banks, provincial
agriculture and extension departments, input
suppliers, agri marketing companies, etc,
and arrange programmes to disseminate
knowledge and skills to the farmers at
grass-roots level", he added.
Referring to several initiatives taken by
the State Bank for promotion of agri
financing, Raza talked about launching of
Pilot Project Phase II for disbursement of
agri credit in 28 under-served districts,
introduction of one-window operation, relief
package for agri loans in NWFP & FATA,
credit guarantee scheme for small farmers
for war-affected areas, refinancing facility
for modernisation of rice husking mills and
cotton ginning factories, training
programmes for the officials of credit
administration and risk management
departments of banks, etc.
He said that the State Bank has been working
on development of 'credit guarantee scheme'
for small and marginalised farmers,
simplification of agri lending procedures
and turnaround time, model Shariah-compliant
products for agriculture financing, market
development for agri commodities through
warehousing system and trading at National
Commodity Exchange Limited. The warehousing
system will facilitate small farmers to
realise prices and avail banks'
collateralised credit through warehouse
receipt.
While giving a brief overview of the sector,
the SBP Governor said that the agriculture
sector has shown an average growth of 4.5
percent in last five years and it provides
livelihood to 66 percent of the population.
However, banks' credit to farmers has
remained almost stagnant ie 42-45 percent of
the credit requirements of the farming
community, and approximately 2 million
against 6.6 million farm household being
served, he pointed out. The share of agri
credit in total banks' credit had declined
from 6.8 percent in 2005 to 4.7 percent in
June 2009 while the target for agri credit
for the current fiscal year is Rs 260
billion against estimated overall credit
requirement of Rs 533 billion.
Raza said that major reasons for the below
par performance of banks, as far as agri.
credit is concerned, were lack of interest,
product development and human resource
problems. Representatives from farmers'
associations and other stakeholders also
pointed out various hurdles in the promotion
of agri financing. The SBP Governor asked
the banks to resolve the issues in
disbursement of agri loans to the farming
community.
Representatives from Zarai Taraqiati Bank,
National Bank and Habib Bank informed the
participants about various initiatives taken
by these banks to boost agri credit.
Representatives of commercial banks assured
the ACAC meeting that the agri disbursement
target of Rs 260 billion for this fiscal
year would be met. The meeting was attended,
among others, by heads of commercial banks,
representatives of agriculture chambers and
trade bodies, officials of relevant
federal/provincial departments, besides
senior officials of the State Bank.
Copyright Business Recorder, 2010
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