Muhammad Ashraf Khan

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Finance Sub Committee of Prime Ministerial
Committee on Agriculture

• Muhammad Ashraf Khan
• Director, Agricultural Credit Department, SBP

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Types of Agri. Credit Requirements

• Farm Sector
• Production Loan
• Development Loan
• Non-Farm Sector
• Working Capital
• Term Loan

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Sources of Agri. Credit

• Specialized Banks
• Zarai Taraqiati Bank Ltd.
• Punjab Provincial Cooperative Bank Ltd.
• Microfinance Banks
• Commercial Banks
• NGOs-MFIs
• Informal Credit Providers

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Agri. Credit by Banks

• Agri. credit disbursement has increased to Rs 212
  billion in 2007-08 from Rs 45 billion in 2000-01
• Target for 2008-09 is Rs 250 billion, out of
  which banks have disbursed Rs 130 billion during
  Jul 2008 - Feb 2009

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Major share in agri. credit disbursement was
taken by the farm sector mainly for production
purposes.
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Share of Subsistence Farmers in Farm Sector Agri.
Credit is 60-65
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SBPs Initiatives

• Induction of 14 Domestic Private Banks into agri.
  financing
• Introduction of 3 years Revolving Credit Scheme
  for production loans
• Standardization and simplification of Loan
  documentation
• Issuance of separate Prudential Regulations for
  Agri. Financing
• Issuance of guidelines for livestock, fisheries,
  poultry horticulture financing
• Introduction of Financing Scheme for Small
  Farmers
• Introduction of Crop Loan Insurance Scheme
• Enhancement of an average of 70 per acre
  indicative credit limits
• Issuance of Guidelines for Islamic Financing for
  Agriculture
• Opening of at least 20 mandatory branches in
  rural areas
• Formulation of Development Finance Support Units
  at SBP-BSC Offices and Focus Groups on Agri.
  Financing at regional level
• Awareness and training programs at grass root
  level
• Publication of schemes, guidelines, booklets and
  brochures in Urdu, English and regional languages

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• Inspite of all these initiatives and efforts,
  banks are meeting only 40-42 of the credit
  requirements of the farming community
• Rest of the agri. credit needs are met through
  informal sources

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Issues and Constraints

• Non availability of passbooks, issues of fake
  passbook and non-cooperation of revenue
  authorities with the banks and borrowers, and
  non-automation of land record
• Lack of awareness of farmers regarding financial
  services being offered by banks
• Uneconomic size of farms and uneven geographical
  distribution of agri. credit
• Frequent demand for write-offs/waivers
• High NPLs on agri. loans
• Weak infrastructure, research and limited
  capacity of the government departments to
  disseminate the research findings to farmers at
  the grass roots
• The recovery through sale of agri. land is almost
  impossible for banks
• Market distortions by ZTBL due to lending at
  lower than market rate
• Lack of absorption capacity of less developed
  provinces Sindh, NWFP and Baluchistan
• Farmers limited access to the information of
  latest farming techniques
• Shortage of water, quality seed, fertilizers,
  etc.
• Ineffective implementation of governments
  support prices and timely purchase by PASCO and
  other public sector enterprises
• Lack of efficient farming practices and record
  keeping financial knowledge of the farmers

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Recommendations

• Based on the discussions with major agri. lending
  banks, the following measures by the government
  will facilitate in developing an enabling
  environment and supporting infrastructure for
  improving the access of agri. credit through
  banking system -
• Establishment of Credit guarantee scheme for
  agri. financing to small farmers.
• Automation of land record and facilitation in
  issuance of the Agri Pass Books, other Revenue
  Documents (Naqal Khasra Gardawari, etc.), charge
  creation and redemption process, etc in a timely
  manner.
• Removal of withholding tax on cash withdrawal
  from agri. loan accounts of the farmers.
• Awareness and education of farmers about banks
  financial services and related information on
  cropping.
• Implementation of Loans for Agricultural,
  Commercial Industrial Purposes Act, 1973 for
  recovery of banks Non Performing Loans through
  provincial revenue departments (Board of
  Revenues) as Arrears of Land Revenue, as per
  provisions of law.

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Thanks