Bank lending to farmers grows 19%

In July-February, agricultural sector borrowed Rs172b.

KARACHI: Agricultural credit disbursement by banks surged 19% to Rs172.563 billion in the first eight months (July-February) of fiscal year 2011-12 compared to the corresponding period of previous year, the State Bank of Pakistan (SBP) said on Wednesday.

In the previous fiscal year, banks gave Rs145.439 billion to farmers in eight months.

The agricultural sector has performed better this year. In the second-quarter report on the state of economy released on Tuesday, SBP said the growth in agricultural sector despite floods has helped contain inflation so far in FY12 – a sigh of relief for the economy that is facing slow growth in manufacturing and other sectors owing to energy crisis.

However, the increase in lending and the overall growth of the agricultural sector have failed to enthuse analysts, who believe that the next four months of FY12 will be difficult for the farmers.

Muzammil Aslam, economist at JS Global Capital, was of the view that the growth in credit supply to farmers was mainly the result of a sharp increase in cost of agricultural inputs.

“Though the growth in agriculture was satisfactory, I think the sector will not be able to sustain it in the next four months because farmers are not getting enough returns on their produce,” he said.

Five major commercial banks – Allied Bank, Habib Bank, MCB Bank, National Bank and United Bank – lent a total of Rs94.595 billion to farmers in July-February 2011-12 compared with Rs80.415 billion last year, an increase of Rs14.180 billion or 17.63%.

Zarai Taraqiati Bank, the largest specialised bank, loaned Rs31.652 billion to farmers, up by 1.18% from Rs31.282 billion last year.

Published in The Express Tribune, March 22^nd, 2012.