SBP launches Rs500m financing scheme for farmers

The State Bank of Pakistan launches a concessional financing and guarantee scheme to encourage farmers to sow canola.


Express October 05, 2010

KARACHI: The State Bank of Pakistan (SBP) has launched a concessional financing and guarantee scheme, under which Rs500 million have been allocated to encourage farmers to sow canola in the current Rabi season in flood-stricken areas.

The scheme is aimed at reviving agriculture activities and improving access to finance in the flood-hit areas.

According to a circular issued on Tuesday, financing will be provided at affordable and concessional mark-up rates through banks. The banks and Zarai Taraqiati Bank Limited (ZTBL) will obtain the refinance facility to finance the farmers of the flood-hit areas.

Under the scheme, the SBP said, refinance will be provided to banks at 5 per cent per annum and they will be permitted to charge a maximum spread of 3 per cent from the borrowers. Therefore, credit to farmers will be available at 8 per cent per annum and the scheme will remain valid up to October 31, 2011.

“It is expected that the ministry of food and agriculture and provincial agriculture departments will ensure timely availability of hybrid seeds, fertiliser, pesticides and on-ground technical guidance to the farmers,” the SBP said.

Credit will be provided to the farmers of 17 flood-hit districts. These include six districts of Punjab - Layyah, Muzaffargarh, Rajanpur, Rahim Yar Khan, Multan and DG Khan, four districts of Khyber-Pakhtunkhwa - Nowshera, Charsadda, DI Khan and Peshawar, four districts of Sindh - Sukkur, Nausheroferoz, Benazirabad and Larkana and three districts of Balochistan - Nasirabad, Jaffarabad and Jhal Magsi.

All categories of farmers including owner, owner-cum-tenant and tenant will be eligible for agricultural loans which will meet the production and working capital requirements.

The SBP said the tenor of crop production loans and its repayment will be based on the crop cycle up to a maximum of six months while there will be no maximum limit for borrowing by the farmers. However, the borrowing limit of the farmer will be fixed by the bank keeping in view the production cost, cash flows, repayment capacity, risk profile of the borrower, etc.

Principal amount of loans will have to be repaid on the agreed date between the bank and the borrower, but not later than 60 days from the date of harvest of the crop.

In case of default, the SBP will share bona fide losses to the extent of 30 per cent, out of which 50 per cent claims of losses will be reimbursed by the SBP when the loan is categorised as doubtful and the remaining 50 per cent at the time of loss. Claims will be entertained on semi-annual basis, ie, April 30 and October 31.

However, the SBP said “this re-imbursement shall not obviate the lending institutions from the right of recovery of the defaulted amount.”

Published in The Express Tribune, October 6th, 2010.

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