KARACHI, April 30: Whereas overall credit disbursement to the private sector hit an all-time high of Rs237 billion in nine months to March 2004, the share of agricultural credit in it was only about Rs48 billion.

Sources in the State Bank told Dawn that 21 banks involved in agricultural credit disbursement under the SBP scheme offered Rs47.9 billion loans in July-March 2003-04. They said that five major local banks namely (i) National Bank (ii) Habib Bank (iii) United Bank (iv) Muslim Commercial Bank; and (v) Allied Bank made Rs22 billion agricultural loans during this period.

These banks get agricultural credit disbursement targets from the State Bank and are penalized if they fail to meet the same. Other 16 banks also get such targets but those are indicative in nature and they are not penalized if the targets slip by. On top of them is ZTBL or Zarai Taraqiati (Agricultural Development) Bank Ltd.

Sources in SBP say ZTBL disbursed Rs19.4 billion agricultural credit between July-March 2003-04 meeting about 59 per cent its full fiscal year target of Rs33 billion. This means the bank may miss its target. Punjab Provincial Cooperative Bank (PPCB) lent Rs4.8 billion during this period achieving about 64 per cent of its full fiscal year target of Rs7.5 billion.

Fourteen local private banks disbursed Rs1.65 billion to meet two third of their target of Rs2.65 billion. SBP officials fear that these banks may also miss their target.

The list of the banks include (i) Askari Commercial Bank (ii) Bank Al-Habib (iii) Bank Al-Falah (iv) Bolan Bank (v) Faysal Bank (vi) Metropolitan Bank (vii) PICIC Commercial Bank (viii) KASB Bank (ix) Prime Commercial Bank (x) Saudi Pak Bank (xi) Soneri Bank (xii) The Bank of Khyber (xiii) The Bank of Punjab and (xiv) Union Bank Ltd.

Bankers say that the farm credit of Rs47.9 billion disbursed in nine months to March 2004 included both short term and medium term loans. Short term loans are extended for a period of six to nine months for purchase of seeds/fertilizers/pesticides and fuel for tractors etc.

Medium term loans are advanced for five to ten years for investment purposes like purchase of tractors or installation of tube wells and construction of water reservoirs etc.

Leaders of the farming community are critical of the pace of growth in agricultural credit at a time when overall private sector credit disbursement is at a historic high. Private sector credit expansion at Rs237 billion in nine months to March 2004 was more than double the disbursement of Rs101 billion in a year- ago period.

But the disbursement of Rs47.9 billion agricultural credit in July-March 2003-04 was up only by 27 per cent from Rs37.6 billion in a year-ago period. "Real agricultural credit growth cannot take place unless the banks reduce their high lending rates," says president of Sindh Chamber of Agriculture Syed Qamaruzzaman Shah.

He said that ZTBL was still charging around 14 per cent markup on agricultural lending whereas five large commercial banks and 14 smaller private banks were charging around 9 per cent. "These are very high rates particularly at a time when industrialists are getting loans at an average of 5 per cent."

But he quickly admitted that Punjab Cooperative Commercial Bank charges a relatively low markup on agricultural lending i.e. around 6 per cent or so.

Qamaruzzaman Shah, who is also on Agricultural Credit Advisory Committee of the SBP, said real disbursement of agricultural credit in nine months to March 2004 must have been far below the reported figure of Rs47.9 billion.

"Because in most cases fresh agricultural loans are advanced just to recover the old ones. It is just on-book adjustments," he remarked when reached by Dawn over telephone. "The banks particularly ZTBL must tell us how many new borrowers are being entertained."?

Shah says agricultural credit disbursement is not picking up rapidly also because of unrealistically low per acre limits for major crops. "These limits must be raised preferably before the budget."

Central bankers say the limits are indicative and banks can lend in excess of the same if they otherwise feel willing to do so. But bankers say making loans in excess of per-acre limits is not possible for as it requires them a lot of homework. "Besides the SBP may ask for justifications once such loans go bad," said an executive of one of the big five banks.

Another issue concerning disbursement of agricultural loans is that these do not necessarily go to farmers. "Quite often ginning factories provide security to small farmers for seeking farm loans and they are bound to sell un-ginned cotton to the same factories when the crop is harvested," says Syed Qamaruzzaman Shah. "We propose that agricultural loans should be offered only to the farmers. Finance Minister should make a policy statement on this in the budget," he said.