KARACHI, Jan 4: An official Committee on Rural Finance (CRF) has blamed big feudal lords for hijacking a major share of loans from Zarai Tarqqiati Bank Limited (ZTBL), commercial and cooperative banks.

"The benefit of subsidized credit from these institutions has gone mainly to the influential farmers," the committee report observed while explaining that the big farmer's bias is based on availability of collateral and political influence.

The committee was headed by Jehangir Tareen, now Industries and Production Minister, who is also one of the big farmers from the Seraiki belt in Punjab and is reputed to be employing modern farm production and management techniques.

No wonder then, the disbursement of more than Rs120 billion agricultural credit in the last three years or so could only reach a very small number of elite farmers and growth in agriculture seems to have been stunted.

The benefit of increase in procurement prices of various crops, said to be Rs145 billion in the last three years, if one of the advisers at the finance ministry is believed, has been shared by these elite farmers who paid a small amount of Rs2 billion as tax on their total income in all parts of the country.

The report reveals that hardly 15 per cent of the farmers are availing institutional agricultural credit while 85 per cent farmers are forced to seek assistance from the informal credit sector where the rate of interest is unbelievably high at 50 per cent to 100 per cent.

Bankers say that not even 15 per cent farmers have access to the institutional credit because of the lack of title of farm ownership and collateral for the loans.

Based on a previous agricultural survey, bankers estimate 6.5 million farms in the country, of which 86 per cent are of one acre to 12.5 acres size. Al owners of these farms have no title of ownership.

If there is any piece of paper or the old documents known as 'khatonis' in local dialect, it is vulnerable to manipulations and tampering by the influential land lord of the area with active connivance of the district administration and revenue staff, patwaris and tapedars.

Since these owners of small farms have no documents, or if they have one it is said vulnerable to tampering and manipulation, bankers do not accept them as collateral and hence no passbooks are issued. They remain outside the net of the institutional credit and depend entirely on the informal credit system based on exorbitant rates of interest and hence a bondage of slavery.

The remaining 14 per cent farms are of 12.5 per cent to 150 acres plus size. A small number of these farmers have managed to circumvent the three successive land reforms in the country and enjoy political power as they are there in the federal and provincial governments and sit on treasury and opposition benches in Senate, national and all the four provincial assemblies.

The committee has observed that the big farmers borrow from ZTBL and commercial banks in the name of their 'haris', servants and family members. The manipulation of the revenue record in collusion with local petty revenue officials is quite easy.

The committee has noted an interesting behaviour of ZTBL managers, previously Agricultural Development Bank of Pakistan (ADBP), in the feudal dominated areas of Pakistan. The branch managers of the bank keep private diaries that show the record of loan portfolios actually borrowed by the local feudal lords.

It quotes two interesting entries of such a private diary of the ZTBL manager. It shows Mr X borrowed a total amount of Rs5 million and the total number of cases are 650. It means that the feudal lord obtained Rs5 million against 650 passbooks. Similarly, Mr Y is said to have borrowed Rs9 million in 1,000 cases.

The report also quotes a 1986 study of the Punjab Economic Research Institute (PERI). The study found 35 per cent loans were proxy and fictitious. Of these 35 per cent, 25 per cent were disguised proxy.

The 65 per cent loans were "loans actually got". Of these, seven per cent were family loans, 23 per cent genuine loans, 22 per cent with area over reported and 20 per cent area underreported.

Main beneficiaries of proxy loans were the landlords who got 77 per cent. "The obvious conclusion is that the already dismal picture in which only 15 per cent of farmers have access to loans is actually much worse than that figure," is the bottom line of the report.

The main thrust of the report is that the agricultural credit continues to benefit a small and virtually unchanged number of elite farmers for the last few years. A quantum jump in the amount of agricultural credit has not given any benefit to a vast majority of the farming community.

The State Bank annual and periodical reports continue to claim the increase in number of subsistence holding farmers getting agricultural credits. Leaders of the Sindh Chamber of Agriculture blame the managers of government-controlled and commercial banks for demanding extra money from the loanees at the time of disbursement.

"This is true because a loanee in Sindh and other feudal dominated areas comes with 1,000 and more passbooks and the manager wants to have a cut-share in this loan amount," an official at a commercial bank said.

Unfortunately, none of the political parties, including the Pakistan Peoples Party that claims to be a radical party, has any programme for the empowerment of small farmers. The late Zulfikar Ali Bhutto announced the third phase of land reforms and tax on agricultural income in 1977.

These were repealed by the late General Zia-ul-Haq immediately after he took over in July 1977 and in return won the loyalties of all big feudals. President Musharraf invited celebrated South American economist De Soto a few years ago who advised grant of lease hold to small farmers as only effective means of their empowerment.