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Banks asked to dedicate one-fifth of branches to agri-lending

Banks asked to dedicate one-fifth of branches to agri-lending

QUETTA: The Agricultural Credit Advisory Committee (ACAC) has proposed that banks should dedicate at least 20 per cent of total branches to agri-lending, according to a press release on Saturday.

A meeting of the ACAC, which is a national-level consultative committee for setting annual targets for agricultural loans and their monitoring, took place in Quetta on Friday under the chairmanship of State Bank of Pakistan (SBP) Governor Tariq Bajwa.

Mr Bajwa stressed upon four key areas that require special attention of all stakeholders. These include strategising the achievement of the Rs1 trillion disbursement target, increasing financial inclusion of smallholder farmers to address their credit needs, particularly for production loans, rationalising the markup rates on agricultural financing to pass on the benefit of historically low discount rate, and increasing the banks’ footprint in underserved regions and provinces for reducing regional disparities.

Mr Bajwa said it is necessary to meet credit demand in order to successfully harness the untapped potential of agriculture. He highlighted critical challenges confronted by the industry, including the provision of finance to small and marginalised farmers, addressing geographical and sectoral imbalances and financing to non-crop activities.

In particular, financial institutions need to come up with new ideas and products for spreading their outreach to remote and underserved areas, like Balochistan. He also stated that there is a huge scope and demand for Sharia-compliant agri-financing products. He recommended that Islamic banks should increase their focus on Islamic agri-financing.

He informed the audience that due to joint efforts by the SBP and the industry for broadening access to finance, formal credit disbursement by financial institutions increased to Rs704.5 billion in 2016-17 from Rs391.4bn in 2012-13, showing an increase of more than 80pc in four years.

The SBP governor supported the idea of establishing the Bank of Balochistan to improve financial services in the province.

The ACAC proposed that the availability of agri credit officers in agri lending branches should be ensured.

It also proposed that advances should be linked with deposits mobilised from the province to ensure the supply of agri credit in the underserved provinces.

The committee also asked banks to make agri finance a key indicator of the banks’ performance. It asked them to adopt automated land record management system and branchless banking channels to reduce operational costs and rationalise markup rates.

It asked them to ensure capacity building of banking officials in the underserved areas and use service-providers to support farmers in pre- and post-harvest activities.

The meeting was attended by presidents of commercial banks, specialised banks, microfinance banks and Islamic banks besides representatives of the federal and provincial governments, chambers of agriculture and farmers’ associations.

Published in Dawn, August 27th, 2017

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