November 3, 2001	Saturday	Shaba’an 16, 1422

KARACHI, Nov 2: For the third consecutive year in 01-02 banking sector would not be able to meet loaning target (Rs 60 billion) for the farmers, as the biggest loaning agency, the Agricultural Development Bank of Pakistan (ADBP) is virtually limping in its operations for want of resources.

Banking circles say that the ADBP has not been able to get any line of credit from the nationalized and the privatized commercial banks for onward distribution of farm loans.

Following discontinuation of the concessionary line of credits from the State Bank of Pakistan since October last year, the ADBP was asked to seek credits from the banks to augment its resources.

According to banking circles, the banks and the ADBP were not able to reach an agreement on the rate of interest on which the banks should offer credit to the ADBP.

Finally, the intervention of the State Bank settled the issue, and it was decided that banks will charge a minimum average of T- Bills rate from the ADBP on credit they would offer.

The State Bank also offered an option to the banks to include their credits for the ADBP in their mandatory targets of the agricultural credit.

However, banks have not been tempted to offer any line of credit to the ADBP. A meeting of the Federal Committee on Agriculture (FCA) held last Friday at Islamabad was informed that the ADBP was depending entirely on its own recoveries to offer loans to the farmers.

The meeting was chaired by the Federal Food and Agricultural Minister Khair Mohammad Junejo to take stock of the crops situation and review the credit disbursement position in agricultural sector.

Out of total Rs60 billion credit to be disbursed in the current fiscal year, the ADBP has been given the highest target followed by the nationalized and the privatized commercial banks.

For last two consecutive years, the ADBP has not been able to achieve its recovery and loan disbursement targets. Since the ADBP is the single largest loaning agency for the agricultural sector, its shortfall in recoveries and disbursement affect the overall credit supply to the agriculture.

In 1999-2000, the target for agricultural credit was set at Rs52.92 billion. But the SBP annual report for 2000-2001 informs that Rs39.7 billion agricultural loans were disbursed in 99-00. The loan disbursement was scaled down to Rs49.26 billion in 00- 01 when actual disbursement was Rs44 billion.

The ADBP was asked to disburse Rs35 billion in 99-00. It could offer only Rs24.4 billion loans to the farmers in that year. In last fiscal year, the ADBP was given a task to give Rs31.25 billion loans but it provided only Rs27.6 billion loans to the farmers.

Main reason for this shortfall in loan disbursement is ADBP’s inability to recover targeted amount in last two year. During the last fiscal year the ADBP was asked to recover Rs49.29 billion loans from the farmers. It could recover only Rs31.9 billion. Since the ADBP depends entirely on its recoveries for loaning operations, the disbursement fell short of the targets.

The SBP report attributes low loan recovery from farmers to drought that struck a big part of the country. The government has to defer the recovery drive in many districts of Sindh and Punjab, and the ADBP was asked to restructure farmers’ loans.

An official document reported total outstanding loans of the ADBP at Rs75.72 billion at the end of May this year. Total outstanding agricultural loans of all the institutions, commercial banks, the ADBP and the Federal Cooperative Bank amount to Rs89.52 billion at the end of May this year.

The SBP report ADBP recovery at 75 per cent of the target fixed for Punjab, 62 per cent of Sindh’s target, 63 per cent of NWFP target and only 21 per cent of the Balochistan target.

The SBP has discontinued concessionary credits to the ADBP mainly to motivate it for recovery. The ADBP was asked to seek credit lines from the commercial banks to ensure that market based cost of funding would force agricultural lending rates to be aligned with commercial lending rates, and in the long run, greater competition amongst the banks in terms of lending to agriculture should bring down lending rates.