HYDERABAD: Farmers in Sindh are always in need of agriculture loans and banks, both in private and public sector, offer them the facility. But their complicated and lethargic application process forced peasants to depend on private lenders, called peddeys in rural Sindh.

Primarily, it is a tedious process of farmers’ loan applications that discourages farmers to approach commercial banks whereas public sector banks i.e., National Bank of Pakistan and Zarai Taraqiati Bank Limited (ZTBL) could cater to needs of a small section of growers.

Peddeys, by and large, run agrarian economy in rural Sindh as far as small farmers are concerned as they always turn to them to seek loan to meet expenses from sowing to harvesting of any crop. For a poor and small farmer, a peddy charges around 120 per cent mark up and in case of somewhat well-off farmer, he charges 30 per cent for six months and 60 per cent for a year.

“Peddeys purchase crop from small growers for a price lesser than the market rate and get 42kg in case of wheat instead of a maund which is usually around 40kg,” says Nadeem Shah, an influential grower. Farmers, he adds, often give their livestock to peddeys to settle their liabilities. So, these are peddeys who run farmers’ economy in rural Sindh in the absence of an expeditious, simplified and farmer friendly credit lending system.

Disbursement of farm credit is a serious issue in Sindh. Banks are hit by missing credit line or stuck-up loans that prevent them from extending fresh loans. Farmers always need cash which comes in handy for them, something not possible in banks.

According to Sindh Chamber of Agriculture general secretary Nabi Bux Sathio, small number of credit disbursement officers coupled with cumbersome loaning process badly hit farmers to get loans from banks. “We have a double whammy of belated process of passbooks by revenue officials and unfriendly attitude of banks,” he says.

Credit off-take, says a central bank officer, is affected last year for a variety of reasons, including lower commodity prices like sugarcane and cotton, increasing cost of inputs etc. Automation of revenue record hit loaning process in Sindh. According to him, the State Bank of Pakistan (SBP) is trying to pay attention to under-served areas, focus minor crops and non-farm sector like livestock. “Commercial bank’s outreach to small farmers is not impressive,” he concedes.

Among public sector banks, ZTBL achieved 98 pc (Rs12.764 billion) of lending target (Rs12.904bn) in Sindh’s different zones until Dec 31, 2015, and recovered Rs11.793bn (82 pc) against the target of Rs14,378bn. In 2016, Rs11.909bn are to be disbursed across Sindh. An amount of Rs14.474bn is said to be outstanding against borrowers. “Our recovery rate has been impressive over the years,” says Iqbal Abbasi, head of Hyderabad zone ZTBL. With more credit lines, the ZTBL could meet growers’ loan demands which are amidst rising costs of inputs, he adds.

Banks offer loans for seed, fertilizer, pesticides, land management, tractor, tube-wells and solar tube-wells. Commercial banks in many cases lend money to cotton ginning factories, rice and sugar mill owners and count it under farm credit to meet targets, set by the SBP.

A senior private banker says private banks manipulate figures, otherwise actual off-take in agriculture sector remain below par.

“Private banks don’t follow the SBP’s guidelines which require them to appoint graduates from Sindh Agriculture University (SAU) as agriculture finance officers (AFOs),” he says.

The NBP has stopped offering loans at the regional level and it is bank’s head office which processes such applications. A scheme is under consideration to restart applications’ process at the branch level. If okayed, two concessions are to be given i.e., payment of principal amount in one go with mark-up’s waiver and payment of principal amount with one year’s mark-up if borrower seeks time to pay the debt. This year the rate of mark-up has been reduced to 13.5pc from 15.5pc.

Liabilities stood at billions after 2010 floods and 2011 heavy rains in Sindh. In ZTBL Hyderabad zone, Rs540m are still stuck up while in case of NBP Hyderabad region Rs600m are to be recovered from around 4,000 farmers. In fact, an amount of Rs1.7bn had stuck up in this region.

As for disbursement, Rs3.7bn were disbursed in NBP Hyderabad region against the target of Rs4bn in 2015. Its target for 2016 is Rs3.5bn. A central bank officer points out that until May 2016, Rs510bn were disbursed against the target of Rs600bn and hopefully target would be met.

The bank’s 70pc is going to farmers having 25 acres or less landholding and 30pc loans are for those having 25-100 acres of lands. Around 80pc of cred it utilized on crop production side and the remaining 20pc for development component so that growers are able to prepare/make their land cultivable. NBP’s Sukkur region last year missed its disbursement target of Rs31.5bn. It disbursed Rs3.152bn after paddy cultivation was banned in the left bank area of the river Indus, which are mainly covered by Sukkur region.

Published in Dawn, August 2nd, 2016

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