FARMERS in Pakistan need double the amount of bank credit which may now be available to them under the National Credit Plan for the current financial year. That much credit at modest interest rates is needed to maintain the present level of agricultural activities. Last year which produced an agriculture growth of 7.6 per cent was an exceptional year because of the record 15 million bales of cotton. The expectations of agricultural growth for the current year is 4.6 per cent which is good enough to follow last year’s exceptional performance.

If, instead the farmers are to go into the varied agro-based industries, horticulture, live-stock farming, dairy industry, fish farming etc, as prime minister Shaukat Aziz has been urging, far more bank credit and on easy terms, would be needed by the farmers. And the banks are not prepared for that much now, starting from a low agricultural credit base.

As the volume of farm credit is only a half of what the farmers need, the resource-less among them rely on the rural money lenders at high interest rates. That reduces the overall production and the growth of agriculture in a country in which 60 per cent of the people depend on agriculture, wholly or partly.

The need for bank credit as estimated by the State Bank of Pakistan now is Rs292.5 billion, while the 21 banks which provide agricultural loans, have earmarked Rs130 billion. And that is a small improvement over the allocation of Rs108.6 billion last year, an increase of about Rs28 billion which is positively small compared to the real need.

Bankers say the gap between the farmers’ need and the credit available to them cannot be filled this year or one or two years but would be filled soon, for predictable reasons.

In recent times over Rs100 billion has been pumped into the farm belt. Support prices for various agricultural products have been rising fast. After staying at Rs300 for 40 kg, the support prices for wheat jumped by Rs100 in two years to reach Rs400. The TCP has been buying cotton when the output is marked by a large surplus. Support prices for rice and a variety of vegetables have been going up to keep the supply up and the farmers happy.

As a result, the repayment of farm loans have been excellent. The National Bank was a classic case last year. It recovered Rs35 billion last year, while providing only Rs15 billion as additional loans to farmers. Four major Pakistani banks improved their recovery rate by 89 to 97 per cent last year. That is tremendous encouragement to the bankers to give larger or more loans.

The more enterprising farmers may soon be exporting far more of agricultural products and in large quantities, like mango and rice to China.

The prices of many vegetables not under the support price scheme have also been rising. Ginger and lemon, for example, are bringing large revenues to the farmers. This price trend has been visible for a long time and agitating the consumers, more so during the festivals.

Agriculture in some parts of South Asia too is so advanced that India has been some part exporting tulips and orchids cultivated there. The rich in Pakistan are buying them gladly at cheaper rates compared to what they have to pay for the Dutch or Thai products.

The banks have good reasons to be active in the farming areas, both from the point of view of deposits and advances. Some of the farmers are very rich and want to be good bank clients.

Where the agriculture is more developed the demand for bank credit is more. On the basis of what the provincial governments have suggested Punjab needs a bank credit of Rs200.75 billion and Sindh Rs54.25 billion. The Frontier province needs Rs27.6 billion, Balochistan Rs9 billion and Azad Kashmir Rs900 million.

Sindh has to opt for modern training in a big way and diversify its agriculture and increase its output. The credit needs of the province is a measure of development in each province.

As the farmers become richer with more funds to spend at their own discretion, there is the fear that they might copy the feudal lords of the area in spending lavishly on weddings or other ceremonies. That feudal culture is much too strong is the villages and that is supposed to be a symbol of success to be flaunted and cherished. As a result, agricultural development gets under-funded, while personal spending rises.

In fact, where bank credit is not readily available to the farmer, the extra income of the farmers has been used to repay the old loans of the money lenders and borrow more from them.

The usual rate of lending by the money leaders is six per cent a month or 72 per cent in a year, which is very high and keeps the borrower indebted for long. Compared to that the bank lend at 9-13 per cent. However some enlightened money lenders provide credit at 48 to 72 per cent.

Farmers any day would prefer bank credit to borrowing from the feudal lords or his underlings, and eventually end up as their bonded labour.

Farmers compare the high cost of agricultural credit and the manner industrial loans are given to political leaders. They refer to the loan of Rs82 million provided to Jam Yusuf, now chief minister of Balochistan, to set up the Bela Ghee Mills, which was eventually written off. The issue came before the National Assembly Standing Committee of Finance which was shocked by the massive write off.

The spokesman for the Chief Minister explained that several large loans taken from the IDBP were written off in this manner.

He said the basic loan was Rs20 million. Default in repaying the loan or making payment of interest swelled the loan to Rs82 million which was written off along with many other loans given by the IDBP.

The IDBP has suffered a loss of Rs25-30 billion and is absolutely bankrupt. So the central government provided a grant of Rs8 billion to pay the salaries of the officers and staff. There was so much waste that for a meeting of board of directors Rs0.1 million was spent on each of the directors for just one sitting.

They oversaw the bank so well that they had to be paid so much for each sitting instead of being prosecuted for their utter failure.

Another case has come up in the Punjab Assembly charging the chief minister of the Punjab with getting two loans of Rs39 million written off by two banks. One loan for Rs22.79 million was from the MCB and the other for Rs16.32 million was from the UBL. Both were industrial loans but the chief minister’s spokesman has emphatically denied that any such default took place. It is now for the assembly to decide.

But they are not the only political leaders who got their loans written off, many more did that and for larger amounts.

Compared to that the farmers loan is small and yet he has to pay a heavy price to get, often pay bribe-money as well.