KARACHI: Banks disbursed Rs1.215 trillion to agriculture sector during FY2019-20, which was 3.5 per cent higher than the previous fiscal year but less than the credit target of Rs1.35tr set by the Agricultural Credit Advisory Committee in November 2019.

The State Bank of Pakistan (SBP) on Monday released details on the agriculture credit disbursements which fell against the target. Moreover, number of borrowers also declined during the fiscal year under review.

Several factors constrained growth of agriculture credit during the fiscal year including the impact of Covid-19 pandemic, locust attack and continuing real side issues including water shortage, low production of cotton, sugarcane, low fertiliser off-take and price volatility in agriculture produce etc., said the SBP.

The outstanding portfolio of agriculture credit increased to Rs581 billion at end June, registering growth of 3.3pc compared with the last year’s position of Rs562bn.

However, the number of agriculture borrowers declined from 4.01 million at end June 2019 to 3.74m at end June, 2020 due to the pandemic-led lockdown in the country.

According to the SBP, the numbers show that during FY20, five major commercial banks collectively disbursed agriculture loans worth Rs708.3bn or 100.5pc of their annual target of Rs705bn, specialised banks disbursed Rs71.1bn or 62.9pc of their annual target of Rs113bn and 14 domestic private banks as a group achieved 88.7pc by disbursing Rs225bn against their target of Rs253.6bn.

Further, five Islamic Banks as a group achieved 76.6pc of their annual target of Rs55bn by disbursing Rs42.1bn which is 6.1pc higher than the disbursement made during the corresponding period last year.

Similarly, the Islamic windows of commercial banks disbursed Rs43.5bn or 79.2pc against the target of Rs55bn in FY20 which is 33pc higher from the disbursement of Rs32.7bn made during last year.

The agriculture credit of microfinance sector remained relatively sluggish due to Covid-19 lockdown in the second half of FY20. Meanwhile, microfinance banks achieved 75.7pc of their collective target by disbursing agriculture loans of Rs139.3bn to small farmers which is 9.5pc lower than the disbursement of Rs154bn during same period last year.

Likewise, the microfinance institutions and rural support programs collectively achieved 73.4pc of their targets by disbursing Rs28.9bn, which is 15pc lower than the disbursement of Rs34bn made during the last year to small and marginalised farmers.

The SBP announced a comprehensive relief package in collaboration with stakeholders for relief of agriculture sector to deal with the adverse implications of the ongoing pandemic on the farming community and agriculture business in the downstream of value chains.

These measures which included deferment of principal and restructuring and rescheduling of agriculture loans were initially allowed up till June 30. However, they were extended to Sept 30. The SBP said it will continue to monitor the situation and it may introduce more measures to help the sector manage its finances during this temporary phase of disruption.

Published in Dawn, August 25th, 2020