Agriculture credit: 2014-15 Banks surpass disbursement target of Rs500b by 3.2%

5 major banks disbursed Rs262.9b, performance of 4 Islamic banks termed impressive.

KARACHI:

Banks surpassed the agricultural credit disbursement target, which is set by the central bank’s Agricultural Credit Advisory Committee (ACAC), in 2014-15 by Rs15.9 billion.

According to the State Bank of Pakistan (SBP), banks disbursed Rs515.9 billion in the last fiscal year, which is Rs15.9 billion (or 3.2%) in excess of the target of Rs500 billion.

On a year-on-year basis, the disbursed amount is 31.8% higher than the disbursements of Rs391.4 billion made in 2013-14.

In addition to a notable rise in fresh disbursements, SBP data also shows growth in the outstanding portfolio of agri loans, which amounted to Rs335.2 billion at the end of the last fiscal year. The outstanding portfolio is up 15.5%, or Rs45 billion, from Rs290.3 billion at the end of 2013-14.

“The agri credit target of Rs500 billion in 2014-15 (28% higher than the actual agri credit disbursement in 2013-14) was ambitious by any standards, given the higher risk perception of banks about agri financing and volatility in the prices of agri produce,” the SBP claimed in its press statement.



The SBP said it adopted a multipronged strategy for achieving the target that included sensitising banks to adopt agri financing as a viable business line, diversification of the agri lending portfolios of banks, increase in per-acre credit limits and extending the scope of eligible items, development of new product eco-system, including value chain financing, and inclusion of microfinance and Islamic banks for small and faith-sensitive clients.

Banks have surpassed agricultural credit targets annually since 2011-12 with an average real growth of 10.8% as opposed to 3% growth in agriculture GDP over the same period.

A review of the banks’ performance for 2014-15 reveals that five major banks collectively disbursed agri loans of Rs262.9 billion, or 104.1% of their annual target of Rs252.5 billion, which is 34.5% higher than the disbursements made in the preceding fiscal year.

Amongst the five major banks, Habib Bank (HBL) achieved 113% of its annual target while MCB Bank, United Bank (UBL), Allied Bank (ABL) and National Bank (NBP)  achieved 102.6%, 101.4%, 101.2% and 100.1% of their individual annual targets, respectively.

Among specialised banks, Zarai Taraqiati Bank (ZTBL) disbursed Rs95.8 billion, or 106.5% of its annual target of Rs90 billion, while Punjab Provincial Cooperative Bank (PPCBL) disbursed Rs10.5 billion, achieving 91.2% against its target of Rs11.5 billion in 2014-15.

Fifteen domestic private banks as a group achieved 94.1% of their combined target. Within this group, Faysal Bank, Bank Alfalah, JS Bank, Bank of Khyber, Bank of Punjab and Standard Chartered Bank were the top performers, as they surpassed their allocated annual targets.

Banks that could not meet their targets in 2014-15 were Summit Bank (99.6%), Habib Metropolitan Bank (96.2%), Askari Bank (86%), Soneri Bank (85.8%), NIB Bank (85.3%), Sindh Bank (80.9%), Bank Al Habib (72.1%) and Silk Bank (63.1%).

The group of four Islamic banks also posed impressive disbursement figures in 2014-15, as it collectively disbursed Rs5 billion against the target of Rs2.3 billion.

Published in The Express Tribune, July 25^th, 2015.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.