KARACHI, June 27: Agricultural loaning in Pakistan has been on the rise over the past five years but banks are lending more to farmers for production purposes rather than for farm development. Data obtained from the State Bank records show that the loans made for agricultural production shot up from Rs28.4 billion in fiscal year July-June 1999-00 to Rs53.8 billion in 2003-04. But, during this period, farm development loans rose from Rs8.1 billion to Rs9.4 billion. That is, whereas production loans grew by more than 89 per cent, development loans recorded an increase of 16 per cent only.

During the current fiscal year, the agricultural sector is going to get around Rs100 billion loans for the first time in Pakistan’s history “but I am sure development loans will be not more than 10 per cent of that or so,” said Syed Qamaruzzaman Shah who heads Sindh Chamber of Agriculture.

Farm development sector not only gets a small portion of overall agricultural credit but the number of farmers who avail of development loans is also much smaller than the number of farmers who get production loans.

In fiscal year 2003-04, around 1.04 million farmers had received production loans whereas the number of those who availed of development loans was around 38,400. Five years ago, in 1999-00, banks had offered production loans to 873,000 farmers whereas they had given development loans to only 34,140 agriculturists.

“Is this the way to develop the agriculture sector and let it contribute in overall economic growth?” questions Qamaruzzaman Shah who has been a member of Agricultural Credit Consultative Committee or ACC for many years. “From the forum of ACC and also from the forum of the Federation of Pakistan Chambers of Agriculture we have underlined the need for increasing development loans substantially but to no avail,” he said when reached by Dawn over telephone.

Banks give production-loans to help farmers buy seeds, fertilizers, pesticides and other inputs. They offer development loans to enable them to purchase tractors, thrashers, harvesters, etc., and finance their storage and transportation operations. Whereas a big increase in agricultural production loans not only indicate increased activity in this sector but also point to higher prices of farm inputs. The same is true for development loans as well, but these loans once made, continue to enhance farmers’ ability to produce more and better quality crops. It also lays the foundation of modernizing agricultural sector and thus increases its production base and its contribution to the GDP growth.

The agricultural sector has not shown a significant growth in the last five years though the authorities believe that during this fiscal year it would grow by an impressive 7.5 per cent on the back of a record bumper cotton crop and increased wheat output. In the last fiscal year, the agricultural sector had grown by just 2.6 per cent.

Non-farm Sector: Whereas the share of development loans in overall agricultural credit has not risen substantially over the last five years, banks have managed to lend more to the non-farm sub-sectors of agriculture. SBP data show that lending to non-farm or non-crop producing sector shot up from Rs1.5 billion in 1999-00 to Rs10.1 billion in 2003-04.

Non-farm sectors include livestock, poultry, forestry, fisheries and other such areas of agriculture. What is even more encouraging is that more than 95 per cent of the non-farm bank credit went to small borrowers. That explains why the number of borrowers of non-farm bank credit jumped to more than 58,100 in the last fiscal year from 29,700 in 1999-00.