Banks directed to speed up agri-financing

KARACHI: The State Bank of Pakistan (SBP) has asked banks to implement the Kissan Package in ‘letter and spirit’ to achieve the agriculture credit target of Rs1.8 trillion set for the current fiscal year.

The banks disbursed Rs664 billion agri loans in the first five months of 2022-23, which accounted for 36 per cent of the target.

Chairing the annual meeting of the Agricultural Credit Advisory Committee (ACAC) on Thursday, SBP Governor Jameel Ahmad referred to the devastation caused by recent floods and observed that climate change is the biggest threat to the country due to its unforeseen impacts.

“While the government, businesses and societies are recognising such threats, we need to take timely actions and allocate required resources for research and development of relevant products and services and capacity building of stakeholders to address them preemptively,” said the governor.

Rs664bn farm loans disbursed in 5MFY23

He said that the government keeping the quantum of devastation in view has announced a comprehensive package for restructuring and rescheduling of agriculture loans, mark-up waiver for outstanding small loans in flood-hit areas, interest-free loans for subsistence and landless farmers and subsidised loans and risk-sharing scheme for farm mechanisation and other support measures.

The SBP governor said that the package would facilitate the recovery of farmers from the impact of recent floods. He also assured SBP’s full support to the banks wherever needed.

However, due to huge losses to the agriculture sector banks feel the threat that aggressive lending could cause large defaults in the wake of the very slow recovery of the rural areas.

The World Bank has approved a $1.7bn loan to support the recovery of farmers and farmlands in Sindh but the announcement would take time to realise the amount.

The banks disbursed Rs1,419bn agri loans in FY22.

This year heavy rains caused serious damage across the country, but Sindh was the worst-hit province. So far nothing has been done for capacity building of the flood-hit farmers and their lands. The Sindh government is under serious criticism over the situation since many agricultural lands are still under water.

The SBP governor also underlined that banks have a huge opportunity to exploit the untapped potential of Islamic agriculture financing for SBP’s commitment to transform conventional banking into Islamic banking in the next five years.

He said that the share of Islamic financing in agriculture is still quite low and urged the industry to work on developing demand-driven Islamic financing products, specifically tailored to the requirements of the farming community.