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Banking Industry Misses Agriculture Credit Target of Rs. 1.5 Trillion in FY21

The banking industry has failed to achieve its target of Rs. 1.5 trillion for the agriculture credit disbursement due to the ongoing challenges of the COVID-19 pandemic and climate changes.

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The credit disbursement to the agriculture sector increased to Rs. 1.36 trillion in FY21, with a growth of 12 percent over FY20, according to the data released by the State Bank of Pakistan (SBP).


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Also, the number of agricultural credit borrowers had declined by five percent, down from 3.7 million in FY20 to 3.5 million in FY21 primarily due to a pandemic-induced limited outreach.

The disbursement is a collective effort of 49 financial institutions that achieved 91 percent of their assigned target of Rs. 1.5 trillion for the year.

During FY21, the commercial banks, specialized banks, and Islamic banks disbursed Rs. 1.210 trillion against their target of Rs. 1.277 trillion, thus achieving 95 percent of their assigned disbursement target.

However, as a group, microfinance banks achieved 73 percent of their target by disbursing agricultural loans of Rs. 132 billion to small farmers. Likewise, the microfinance institutions/rural support programs collectively achieved 57 percent of their target by disbursing Rs. 23 billion to small and marginalized farmers.

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The central bank, together with the government and private sector, made concerted efforts for the development and commercialization of the agricultural sector through the provision of formal financial services.

Moreover, the proactive response by the SBP to combat the threats of the pandemic bolstered the economy and resulted in a relatively quick rebound in economic activities across all the major sectors, including agriculture.

Additionally, by reducing the policy rate by 625 basis points, the SBP also allowed banks to offer the principal deferment and restructuring of agriculture loans to help combat economic disruptions.

Since April 2021, around two million borrowers in the agriculture and microfinance sectors have availed the deferred principal and restructured loan option with outstanding loans amounting to Rs. 132 billion.

The SBP’s programs and policy interventions addressed the cross-cutting issue of food security enabling a regulatory environment, greater inclusion of women, and advancements in farm practices.


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Furthermore, the SBP facilitated banks’ partnerships with the provincial Land Revenue Authorities for the integration and use of automated land records for loans.

The government’s crop loan insurance and livestock loan insurance schemes also played an instrumental role in encouraging banks to provide loans to small farmers.

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