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.
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