SBP launches credit scheme for farmers

Says new scheme offers seamless process for storage of produce, provision of credit

KARACHI:

Commercial banks must extend credit to farmers as per their potential and make it easier for them to acquire financing, said State Bank of Pakistan (SBP) Governor Reza Baqir.

Speaking at the launch of Electronic Warehouse Receipt Financing for maize crop at Habibabad, Kasur on Tuesday, the governor emphasised that farmers would now be able to offer adequate collateral to banks for getting loans.

Terming the financing facility a win-win situation for different stakeholders including farmers, banks and collateral management companies, he added that it offered a smooth and reliable process in terms of storage of the produce, creation of receipts and provision of credit.

He pointed out that last year only 59% of the credit needs of farmers were met through banks and underlined the need to enhance the financing significantly.

“Farmers are the key beneficiaries of the scheme because they can now manage the risks emanating from price fluctuation in a better way,” he remarked.

“Farmers are often forced to sell their crops at lower prices during the harvesting season owing to the unavailability of storage facilities and to meet their pressing cash requirements.”

With the launch of warehouse receipt financing facility, they will now be able to meet their financing needs from banks. The scheme will incentivise the establishment of modern storage facilities by creating demand for warehouses from the farmers.

Baqir highlighted that besides enhanced credit availability, the scheme would help improve food security by minimising post-harvest losses caused by unavailability of modern storage spaces.

“It will also assist in better price discovery, which will increase farmers’ profitability and guide them towards better decision making with regard to farming,” he said.

He revealed that the SBP had formed a high-level task force for the Electronic Warehouse Receipt Financing, comprising key stakeholders, to develop synergies and address bottlenecks and challenges in the way of benefitting from the scheme.

The task force will be responsible for steering the entire action plan, monitoring performance and providing strategic direction to boost the scheme.

On the occasion, Habib Bank Limited President and CEO Muhammad Aurangzeb said that the initiative offered huge incentives to banks to extend financing to the farmers.

Terming it a right step towards facilitating the farming community, he added that it would aid in tapping the complete potential of agriculture sector and contribute to economic growth of the country.

Bank of Punjab (BOP) President and CEO Zafar Masud was of the opinion that the Electronic Warehouse Receipt Financing would not only boost the economic wellbeing of farmers but would also deal with post-harvest losses of various crops.

Lately, the SBP had been making efforts to ensure the availability of adequate credit for agricultural purposes, said a statement.

“In this regard, the SBP recently increased credit limits for farmers to meet their input requirements,” it said. “Earlier, the SBP set the agricultural credit target for banks at an all-time high of Rs1.7 trillion for fiscal year 2021-22.”

At the event, banks signed an agreement with a collateral management company to start operations under the newly developed system.

Published in The Express Tribune, February 23^rd, 2022.

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