Pakistan banking industry failed to achieve an ambitious target of Rs. 1 trillion for agriculture credit set by the State Bank of Pakistan (SBP) for the financial year 2017-18.
According to SBP, banks collectively disbursed Rs. 972.6 billion for FY 2017-18, which is 38.1% higher than last year’s disbursements of Rs. 704.5 billion.
The central bank directed banks to focus on agriculture credit across the country in order to meet the requirements of agriculture and related sectors. However, banks did not succeed in attaining the target falling short by Rs. 27.4 billion.
The achievement of agri credit disbursement was a challenging task in the backdrop of various challenges like; water shortage, low production of maize & wheat, price volatility of agri produce and high cost of production.
The central bank designed a roadmap for banks to reach out to 4.27 million farmers in the outgoing financial year. The banking industry also missed that target.
The agricultural credit outreach has increased to 3.72 million farmers by the end of June 2018, up from 3.27 million farmers last year recording a growth of 13.8%.
However, SBP made concerted efforts for achieving the agri credit disbursement target and implementing various budgetary initiatives set by the government. These efforts included; provision of enabling a regulatory environment for agri lending institutions, sensitizing banks to adopt agri financing as a viable business proposition, exploring new avenues of financing; value chain financing, digitalization of credit, warehouse receipt financing and implementation of credit guarantee scheme for small and marginalized farmers etc.
It asked banks to dedicate 20 percent credit disbursement of every branch to the agriculture sector.
SBP has taken various initiatives for promoting agri credit, which include allocation of regional targets, recruitment of ACOs by organizing job fairs in agri universities and continuous follow up with banks for the achievement of the targets. Furthermore, farmer’s awareness programs at grass root level have also helped in improving agri disbursement in underserved areas.
The agri outstanding portfolio increased to Rs. 469.4 billion by June 2018 registering a growth of 15.7% compared to last year’s Rs. 405.8 billion.
The analysis of agri credit disbursement during FY 2017-18 reveals that five major banks collectively disbursed agri loans of Rs. 523.9 billion or 101.5 % of their annual target of Rs 516 billion, increasing by 52.9% from Rs. 342.6 billion disbursed during last year. Under specialized banks category, ZTBL disbursed Rs. 83.2 billion or 66.6% of its annual target of Rs. 125 billion while PPCBL disbursed Rs. 10.7 billion achieving 71.5% against its target of Rs. 15 billion during FY 2017-18.
Fifteen domestic private banks as a group achieved 92.4% against the target of Rs. 200 billion and five Islamic Banks achieved 82% of their total target of Rs. 20 billion.
The performance of Microfinance Banks and Microfinance Institutions remained encouraging and collectively these institutions surpassed their annual targets by disbursing Rs. 124.8 billion and Rs.28.7 billion respectively to small farmers during FY 2017-18.