THE agriculture credit facility is essential for cash-starved growers to buy farm inputs and increase their crop production. However, Sindh’s farmers complain that the province’s share in overall agricultural credit does not match its contribution to the national farm production.

And in times of natural or man-made disasters, the smaller growers are left to fend for themselves when their crops get destroyed by floods and monsoon rains.

With the per-acre cost of production rising over time, growers require more credit, with simplified procedures. But, in most cases, they end up facing disappointment.

According to a recent State Bank of Pakistan report, countrywide farm credit disbursement by banks increased by 31.4pc to Rs439.8bn in the first 11 months (July-May) of the last fiscal year, against Rs334.7bn in the same period of the previous year.

Comparative figures show that Punjab got nearly Rs370bn for its farm and non-farm sector, while Sindh received around Rs60bn

A separate report on disbursement statistics obtained through an SBP source indicates that Sindh had a loan target of Rs70bn in 2014-15, while Rs59.7bn was disbursed to the farm and non-farm sectors during July-May 2014-15, against the target of Rs55bn and actual disbursement of Rs37bn in July-May 2013-14.

Barring a few, most banks are reluctant to advance enough credit. Actually, they neither offer loans on time nor are they usually able to recover the credit on time. Banks don’t have enough agricultural credit officers (ACOs), given the number of their branches.

Therefore, the loans cannot be appraised, approved and disbursed adequately. An ACO is supposed to take care of several branches of a bank.

Then comes the cumbersome procedure of availing the loan facility. Farmers find it hard to meet the documentation conditionalities for credit, and are forced to look towards informal loan providers who demand unusually high mark-up.

“Banks even provide a big chunk of loans to the non-farm sector and treat them as farm credit. There have been cases where auto loans have been shown as a component of agricultural financing to meet targets,” says a former SBP officer.

Referring to the central bank’s recent data which claimed that 88pc of the countrywide credit target of Rs500bn has been disbursed, he says even 50pc of it would not have actually reached the growers. “There are cases of the agro-based industry being offered loans out of the agriculture portfolio.”

And while the loans are generally insured, according to a retired SBP officer, when the crops were hit by disasters in 2010 and 2011, the borrowers didn’t get the benefit as the insurance companies paid half or just 25pc of the insured loan amount. “Several undecided cases have accumulated as a result of this approach.”

According to Sindh Chamber of Agriculture (SCA) general secretary Nabi Bux Sathio, the province contributes 21.4-27.7pc to the country’s agriculture output, but central bank figures for loan disbursement during July-December 2014 are self-explanatory.

“I have repeatedly this raised this point in the SBP’s half-yearly advisory board meetings that the ACOs are not available at bank branches. In many cases, banks refuse to offer loans,” he says. He adds that “the same old big borrowers are provided loans for the next season with slight increases in the loan amounts. The banks are not ready to lend to new borrowers.”

“The SBP is not implementing its own directives. The banks do not attach any importance to the agriculture credit facility, which they otherwise do when it comes to offering loans to the corporate sector,” says a sitting officer of a private bank.

The growers say that the SBP must impose penalties on banks that don’t disburse farm credit. The banks also avoid appointing agriculture graduates — who understand the sector’s demands — as ACOs, mobile credit officers and agriculture finance officers. Often, these positions are filled by those who have graduated in other fields.

Published in Dawn, Economic & Business, July 6th, 2015

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