The State Bank of Pakistan (SBP) has assigned an annual agriculture credit disbursement target of Rs. 1.8 trillion to the financial institutions for the fiscal year 2023.
In a press release, the central bank stated that specific targets have also been set to enhance agricultural productivity. In this regard, Rs. 140 billion have been set aside for wheat production loans.
Moreover, the bank has also set a target of Rs. 45 billion for tractor financing, and Rs. 20 billion for financing harvesters, planters, and other farm machinery.
SBP has also enhanced the per acre indicative credit limits for agriculture financing to support the farming community. Per acre indicative credit limit for wheat has been enhanced from the existing Rs. 60,000 to Rs. 100,000 which will allow farmers to deploy quality inputs for improved yields, SBP added.
The central bank highlighted that during the fiscal year 2022, the financial institutions managed to disburse Rs. 1.41 trillion to the agriculture sector, as compared to Rs. 1.3 trillion was disbursed during the previous fiscal year. Moreover, the outstanding agriculture credit recorded an encouraging growth of over 10 percent and reached Rs. 691 billion by the end of June 2022, according to SBP.
SBP stated that its recent initiatives stirred this unprecedented growth in the agriculture credit portfolio. One of them includes the introduction of a comprehensive agriculture credit scoring model. The model, adopted by the Agricultural Credit Advisory Committee, provides individual scores reflective of each bank’s agriculture credit performance against multi-dimensional criteria based on various indicators including sectoral disbursement, regional performance, outstanding amount, outstanding borrowers, etc., the central bank added.
Under the agriculture credit scoring model, SBP has also released the annual ranking of banks. As per the results for the fiscal year 2022, HBL ranked on top among large banks with a score of 75.4, Bank of Punjab scored 62.1 and ranked highest among mid-sized banks, while Bank Islami stood first among small banks with a score of 55.7. Further, U Microfinance Bank ranked the highest among microfinance banks with a score of 80.4.
However, SBP did acknowledge that growth in agriculture credit disbursement remained subdued during the recent past due to various challenges such as climate change, resource constraints in banks, underutilization of approved limits by borrowers, etc. Moreover, a few banks, particularly large public sector banks, among others, also performed slower than usual and struggled to achieve their assigned annual targets.