KARACHI, Sept 6: State Bank of Pakistan Governor Dr Shamshad Akhtar said here on Saturday that the central bank had set an indicative credit disbursement target of Rs250 billion for agriculture sector for the current fiscal year 09.

This can be further enhanced after having a detailed analysis of the rising input costs of the sector, said an SBP statement here.

Presiding over a meeting of the Agricultural Credit Advisory Committee at the SBP Head Office, Dr Akhtar commended the performance of banks that played a significant role in surpassing the target set for the last fiscal year.

Dr Akhtar informed the meeting that in 2007-08 banks surpassed the agriculture credit target of Rs200 billion and disbursed Rs212 billion to the farming community which is higher by Rs43 billion or 25pc than the last year’s disbursement of Rs169 billion.

She said that keeping in view the growing requirements of the sector, the State Bank has proposed an indicative target of Rs250 billion for 2008-09, which is higher by Rs50 billion or 25pc than last year’s target and Rs38 billion or 15pc higher than the actual disbursements of FY08.

Dr Akhtar appreciated the fact that sector-wise agriculture credit disbursements during the last fiscal year showed diversification of the credit to non-farm sector as its share in the total credit disbursement increased to 25pc in FY08 from 17pc in FY07.She pointed out that recoveries of agriculture loans have shown significant improvement during FY08 and banks recovered 92pc of their recoverable amounts as against 83pc recovered during FY07.

While responding to questions from by representatives of three less developed provinces on lower disbursement of agriculture loans to their respective provinces, the SBP governor said that the banks are making efforts which have resulted in an increase in disbursements during the last couple of years.

The delegates pointed out that there are issues of credit absorption in the provinces because of low productivity, water salinity, lack of good farming practices by the farmers and other issues that need to be addressed by various provincial agriculture and extension services departments to create an enabling environment for banks to increase their outreach.Dr Akhtar urged the representatives of the three provincial governments to take necessary steps to address these issues and improve coordination between respective departments on fast-track basis to increase the flow of agriculture credit to the less developed areas of the country.

The SBP governor also informed the meeting about the recently launched crop loan insurance scheme developed by the SBP task force that would be implemented from coming Rabi crop.

To facilitate small farmers, the government has agreed to share the premium cost of subsistence farmers. She asked banks to adequately publicise the scheme for the benefit of farmers.

It is hoped that banks would also adjust their agriculture loan pricing following introduction of the scheme as it would mitigate their risk of losses due to natural calamity, she added.

Dr Akhtar briefed the committee about State Bank’s initiative of introducing guidelines on Islamic financing for agriculture.

She urged all stakeholders to effectively publicise the scheme for creating awareness among the farming community.

The representatives of the farming community, appreciating the efforts of State Bank and commercial banks in increasing the flow of credit to farming community, highlighted the issues pertaining to low quality seeds, acute shortage of fertilisers, water scarcity and lack of marketing channels.

They suggested to the committee to take up these issues with concerned federal and provincial government departments so that the farming community can utilise banks’ credit efficiently.

The Executive Director, State Bank of Pakistan, Jameel Ahmed, informed the meeting that as per approved plan the banks would open 600 branches during 2008, 20pc of which would be in rural areas.

Dr Shamshad said that the SBP would encourage banks to open as many number of branches as they like in rural un-served areas in addition to approved plan.

The banks briefed the committee on their respective initiatives which inter alia include increase in number of agriculture lending branches, increase in agriculture credit officers, introduction of innovative lending products for farm and non-farm activities and a number of awareness programmes conducted throughout the country.

Dr Shamshad Akhtar informed the committee about the introduction of a scheme under the DFID-funded Financial Inclusion Programme whereby the banks can provide wholesale credit to microfinance banks for onward disbursement to micro borrowers of rural areas against the credit enhancement guarantee scheme.

She said that the initiative would facilitate government efforts to alleviate poverty and also increase access to credit to rural/ farming community, besides banks can contribute to enhancing agriculture credit disbursement through a network of microfinance institutions.—APP