Chairman Securities and Exchange Commission of Pakistan (SECP), Aamir Khan, said that Pakistan’s agri-tech market has massive potential to flourish on account of the regulators’ receptive attitude toward fintech, high teledensity, internet penetration, and improvements in the electronic payments infrastructure.
He made these remarks at the hybrid conference ‘Agritech: Empowering the Rural Farmers’ that was hosted by the Pakistan Fintech Network and Pakistan Microfinance Network.
Khan noted that overcoming the challenges to the agriculture sector requires its merging with technology, but for that to happen, the domestic market players will have to embark on a journey toward agri-tech by understanding the small farmers’ demands and supporting them to scale up their value chain.
Pakistan’s economy is profoundly dependent on the agricultural sector in terms of generating employment, ensuring food security, and supporting a healthy balance of payment. Some of the key issues in the sector are a lack of access to formal credit, minimal use of technology, and the risks posed by climate change. Khan said Pakistan’s large population and vulnerability to climate change necessitates the use of innovative solutions to ensure the scalability, sustainability, and efficiency of the agri-value chain.
The SECP has made numerous improvements in the regulatory ecosystem by simplifying the establishment of startups and improving access to finance, but it has also opened the door for start-ups to pitch their ideas for live testing in a controlled environment.
Khan highlighted some of the recent initiatives the SECP has taken to expand the role of agriculture sector-related technology solutions and mentioned that it has simplified the requirements under Non-bank Financial Companies (NBFCs) regulatory framework to provide flexibility for fintech-based business models. This has also enabled the establishment of NBFCs-focused on agricultural credit.
He remarked that some prospective investors had approached the SECP for the establishment of fintech-enabled NBFCs to provide customized loan products designed for farmers.
Furthermore, the SECP has introduced Collateral Management Companies Regulations to promote the concept of warehousing of agricultural produce. Besides, it has paved the way for electronic warehouse receipts (EWR), which are transferrable and tradable at future exchanges and can also be pledged to financial institutions to obtain finance.
In addition to traditional agricultural insurance products and the existing government-sponsored crop insurance schemes, the SECP has approved parametric insurance solutions for live testing under its regulatory sandbox initiative, Khan explained. So far, it includes 61 wheat farmers in the district of Rahim Yar Khan, which has an area of 168 acres covered in the pilot phase. Parametric insurance provides protection to the insured based on parameters such as rainfall or crop yield in a unit area gathered through technology-based solutions, and is particularly suitable for small farmers.
The event was aimed at creating a platform to bring together stakeholders from Pakistan’s agriculture sector for them to share their expert opinion on the application of agricultural technology and the challenges to the agri-tech companies. The attendees also discussed the options and challenges in digitizing the whole value chain, improving farmer access to digital insurance, and digital crediting Pakistan.
