RECORDER REPORT

KARACHI: Banks failed to achieve the agricultural credit disbursement target of Rs 1.25 trillion for the last fiscal year (FY19), mainly due to some challenges on demand and supply side. However, banks successfully disbursed all-time high Rs 1.174 trillion agricultural loans to over 4 million farmers during the last fiscal year. According to the State Bank of Pakistan (SBP), banks made agricultural credit disbursements of Rs 1.174 trillion or 94 percent against the ambitious target of Rs 1.25 trillion set by Agricultural Credit Advisory Committee (ACAC) for FY19. This disbursement is 21 percent higher than the disbursements of Rs 972.6 billion in FY18.

Further, the agri credit outstanding portfolio also 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 the target of 4.42 million farmers at the end of FY19, recording a growth of 8 percent from 3.72 million farmers at in FY18.

To achieve these numbers, the SBP adopted a multifaceted strategy and made concerted efforts for pursuing a massive agri credit target which included; sensitizing banks to adopt agri. 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 of agricultural credit disbursement is a sizable performance in agricultural lending despite number of demand and supply side challenges.

The SBP said that the achievement could be made due to the integrated efforts of federal/provincial governments, the SBP, financial institutions and other stakeholders. Further, the efforts included rigorous follow up with the top management of banks and agricultural 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 agri. 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 FY19, five major commercial banks collectively have achieved 100 percent target and disbursed agricultural loans of Rs 653.5 billion against their annual target of Rs 651 billion. Specialized banks disbursed Rs 81.2 billion or 72 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 FY19.

Moreover, Microfinance Banks (MFBs) as a group achieved 99 percent by disbursing agricultural loans of Rs. 154 billion to small farmers which is 23 percent higher than the disbursement of Rs 124.8 billion during same period last year.

Similarly, Microfinance Institutions/Rural Support Programs collectively achieved 97 percent of their targets by disbursing Rs 34 billion to small and marginalized farmers during FY19.

Five Islamic banks as a group achieved 79 percent of their annual target of Rs 50 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 billion were assigned for FY19. 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 last fiscal year.