Credit disbursement to agri sector increases 12%

Amounts to Rs1.37tr in FY21 despite Covid-19, climate change challenges

KARACHI:

Credit disbursement to the agriculture sector increased 12% on a year-on-year basis to Rs1.37 trillion in FY21 despite the ongoing challenges posed by the Covid-19 pandemic and climate change.

In a statement on Monday, the State Bank of Pakistan (SBP) said that the disbursement was the collective effort of 49 financial institutions, which managed to achieve 91% of the assigned credit target of Rs1.5 trillion for the year. The outstanding agricultural credit stood at Rs628 billion at the end of June 2021, showing a growth of over 8% compared to June 2020.

“This complements the overall positive outlook of the agriculture sector, which grew 2.77% during FY21,” it said. “However, the number of agricultural credit borrowers declined 5% as they fell from 3.7 million in FY20 to 3.5 million in FY21 primarily due to a limited outreach owing to the ongoing pandemic.”

During FY21, the commercial banks, specialised banks and Islamic banks showed a satisfactory performance by disbursing Rs1.21 trillion against their target of Rs1.28 trillion, achieving 95% of the assigned target.

However, the microfinance banks as a group achieved 73% of their goal by disbursing agricultural loans of Rs132 billion to small farmers, it said.

Likewise, the microfinance institutions and rural support programmes jointly achieved 57% of their target by approving loans of Rs23 billion for the small and marginalised farmers.

“Together with the government and private sector, the SBP made concerted efforts for the development and commercialisation of the agriculture sector through the provision of formal financial services,” the central bank said.

“Furthermore, the proactive response by the SBP to combat the threat posed by the Covid-19 pandemic bolstered the economy and resulted in a rather quick rebound in economic activities across all major sectors including agriculture.”

Besides reducing the policy rate by 625 basis points, the SBP also allowed banks to offer principal loan deferment and restructuring of agricultural loans to help combat economic disruptions. Around two million borrowers in the agriculture and microfinance sectors availed the deferred principal loan and restructured loan option as of April 2021.

Published in The Express Tribune, August 10^th, 2021.

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