State Bank supports creation of Bank of Balochistan

Asks banks to provide funds to small farmers, correct regional imbalances

QUETTA: State Bank of Pakistan (SBP) Governor Tariq Bajwa has called on banks to address critical challenges in the agriculture sector in an attempt to ensure provision of finance to small and marginalised farmers, correct the geographical and sector imbalances and fund non-crop activities.

“In order to successfully harness the untapped potential of agriculture, it is necessary to meet its credit demand,” Bajwa said while presiding over a meeting of the Agricultural Credit Advisory Committee (ACAC) late on Friday evening.

In particular, he said, financial institutions needed to come up with new ideas and products for spreading their outreach to remote and underserved areas like Balochistan.

He supported the idea of establishing the Bank of Balochistan to improve financial services in Balochistan.



The committee took many important decisions for the promotion of agriculture sector in Pakistan.

Senior officers of the central bank, presidents and executives of commercial banks, specialised banks, microfinance and Islamic banks, representatives of federal and provincial governments, the chamber of agriculture and farmer associations were present in the meeting.

Bajwa congratulated ACAC members on surpassing the Rs700 billion agriculture credit target for the previous fiscal year 2016-17 and underlined the importance of four key areas that required special attention of all stakeholders.

These included strategising the achievement of Rs1 trillion agriculture credit disbursement target; increasing financial inclusion of small farmers to address their credit needs, particularly for production loans; rationalising mark-up rates on agriculture financing to pass on the benefit of historically low discount rate and increasing the footprint of banks in underserved regions and provinces for reducing regional disparities.



Bajwa also highlighted the huge scope and demand for Shariah-compliant agriculture financing products and asked Islamic banks to increase their focus on agriculture financing.

He talked about the active role played by the central bank for promoting agriculture financing in the country and its multifaceted approach to sensitise banks to adopt agriculture financing as a viable business line.

Formal credit disbursement by financial institutions increased to Rs704.5 billion in fiscal year 2016-17 from Rs391.4 billion in FY13, showing an increase of more than 80% in four years.

The meeting participants deliberated on the way forward for credit enhancement in the underserved provinces and regions, especially Balochistan.

They proposed key actions including designating at least 20% of bank branches as agriculture lending branches, ensuring availability of credit officers in such offices and achievement of credit targets in underserved provinces and regions, particularly Balochistan, Khyber-Pakhtunkhwa, Azad Jammu and Kashmir and Gilgit-Baltistan.

The proposed measures also included linking advances with the deposits mobilised in the province to ensure provision of agriculture credit in the underserved provinces.

Making agriculture finance a key indicator of banks’ performance, adoption of an automated land record management system, adoption of digital financial services and branchless banking channels to reduce operational cost and rationalise mark-up rates were also recommended.

The committee called for the capacity building of banks’ officials and farmers’ awareness in underserved areas, use of service providers to support farmers in pre- and post-harvest activities and increasing access to finance and other banking services.

While concluding the meeting, the governor expressed his confidence in the banks’ commitment to achieving the agriculture credit target of Rs1,001 billion for FY18, increasing the outreach to agriculture borrowers by one million and enhancing farmers’ productivity through availability of credit, extension services, farm mechanisation, quality seeds and fertilisers, storage facilities and marketing.

He pressed the financial institutions to treat agriculture financing as a strategic part of their overall credit growth policy and encouraged them to explore new markets, develop innovative products, promote Islamic agriculture financing and create more linkages for improving livelihoods in the country.

Published in The Express Tribune, August 27^th, 2017.

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