Robust agri-sector to help meet GDP target

SBP governor says they are on track to achieve agricultural credit goal

LAHORE:

State Bank of Pakistan (SBP) Governor Jameel Ahmad has expressed optimism about a strong recovery in the agriculture sector, which will pave the way for the projected gross domestic product (GDP) growth of 2-3% in the current fiscal year.

Speaking at the annual meeting of the Agricultural Credit Advisory Committee (ACAC), the governor pointed out that the stellar growth of 30% in agricultural credit disbursement in July-October 2023 sparked optimism that “we are on track to comfortably achieve the disbursement target”.

He urged banks to intensify their efforts to not only meet but also surpass the goal.

The agri-credit disbursement target has been set at Rs2,250 billion for FY24, which is 26.7% higher than the financing released last year.

The governor emphasised the need to strengthen and promote growth in the agriculture sector, which was pivotal for socioeconomic development of the country. He pressed banks to ensure easy, timely and hassle-free access for farmers to all financial services including credit, deposits, payments, etc.

Despite various challenges including floods, the agricultural credit disbursements reached an impressive level of Rs1,776 billion during FY23, recording year-on-year growth of 25.2% and achieving 97.6% of the target of Rs1,819 billion.

The governor commended concerted efforts of banks, specialised banks, microfinance banks and microfinance institutions that led to the achievements, which showcased the sector’s strength and adaptability.

Acknowledging the challenges, particularly the attrition of borrowers, he told the ACAC that the State Bank would engage with each bank individually to develop plans and strategies to achieve a sustainable increase in agriculture-sector borrowers.

Banks were advised to not only develop their agri-finance capacity but also forge partnerships with microfinance institutions to increase the outreach of agricultural and rural finance services.

There was a critical need for improving the productivity of farmers to make them a better risk for banks, he said and stressed that banks should collaborate and partner with agritechs, agricultural universities, provincial agricultural departments and other stakeholders to improve the farmers’ productivity through the provision of quality inputs, better farming techniques and optimum use of technology.

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Small farmers also need to be facilitated in the sale of their produce to enable them to fetch competitive market prices where banks can connect them with large and reputed buyers.

Another significant area that requires immediate consideration is the promotion of developmental loans, specifically directed towards mechanisation of the agriculture sector.

The governor advised banks to assess the feasibility of financing for agri-service providers, which provided farm machinery and equipment to farmers on rent.

While recognising Pakistan’s vulnerability to climate change, Ahmad mentioned the SBP’s green initiatives such as the Environmental and Social Risk Management Implementation Manual, financing scheme for renewable energy and green banking guidelines.

He called on the banking industry to proactively address climate change through risk mitigation tools, insurance schemes and collaboration with international donor agencies.

Envisioning an end-to-end automated financing ecosystem, the governor highlighted the transformative power of digital solutions in streamlining and enhancing the efficiency of processes, particularly in the agricultural lending domain.

He recognised the pivotal role of digitalisation in achieving success and underscored the imperative for all banks to fully embrace the Punjab Land Records Authority’s Land Record Management Information System for the processing of agricultural loans by the end of June 2024.

“Other provinces/ regions should expedite the digitisation of their land records to enable integration with banks for the swift processing of loans.”

Published in The Express Tribune, December 16^th, 2023.

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