KARACHI, April 20: Banks involved in agricultural credit distribution are trying hard to lend more money to farmers but chances are that they will miss their collective target of Rs130 billion set for this fiscal year.

Senior bankers told Dawn that all twenty-one banks involved in agricultural lending disbursed about Rs91.2 billion in nine months (July-March) of this fiscal year.

Five big banks — Allied Bank, Habib Bank, National Bank, MCB Bank and United Bank — offered Rs47 billion agricultural loans during July-March 2005-06 against their full fiscal year target of Rs63 billion. Zarai Tarraqiati (Agricultural Development) Bank made Rs29 billion loans during this period against the full year target of Rs43 billion; the Punjab Provincial Co-operative Bank disbursed Rs4.2 billion against the target of Rs9 billion and fourteen other local private banks offered Rs11 billion loans in nine months of this fiscal year. For the full fiscal year their loan disbursement target is Rs15 billion.

The Rs91.2 billion agricultural loans disbursed in nine months of this fiscal are 23.5 per cent higher compared to the Rs73.8 billion disbursed during the same period of the last year. But what is making it unlikely for the banks to achieve this year’s target of Rs130 billion is that banks have increased mark-up on agricultural loans as the State Bank of Pakistan moves on with a tight monetary policy. To some extent, a high base effect is also limiting the banks’ ability to lend over and above the amounts of money they lent in the last fiscal year.

Regardless of whether the banks meet or miss the Rs130 billion target set for agricultural lending this year, the fact remains that agricultural loans as percentage of overall bank credit are not showing much improvement. In the last fiscal year, banks had lent Rs108 billion to the agricultural sector which was roughly one-fourth of overall private sector credit and this year too, the share of agricultural loans in private sector credit would not be more than this.

Agriculturists say they are now getting farm loans from banks at mark-ups ranging between 9-14 per cent whereas in the last fiscal year the rates oscillated between 8-10 per cent. They lament that even a year-on-year 23.5 per cent increase in agricultural loans in nine months of this fiscal year has been offset by rising prices of farm inputs including fertilizers. They also say that banks lend very little for farm development like buying of machinery and implements and concentrate more on short-term loans for raising crops.

That banks lend very little for purchase of machinery is evident from the fact that during July-Feb 2005-06, banks lent Rs3.3 billion for tractors financing, which constituted only four per cent of the total agricultural lending of Rs81 billion during this period. Data relating to July-March tractors financing are not available.