KARACHI, Feb 2: Corporate farming has made a modest start in Punjab where three borrowers have obtained loan of about Rs594 million from the domestic private banks during the first half of the current fiscal year.

"We are processing more than a dozen loan applications for corporate farming and the loan amount may exceed a billion rupees figure by June end," a senior executive of a private bank in Karachi informed Dawn on Wednesday.

During the first half of the last year, the private banks advanced Rs12.39 million for the corporate farming. The size of the corporate farm is bigger than the prescribed economic size of 64 acres and is managed and cultivated on most modern style.

The relatively new private banks--14 in all--are making a big headway in agricultural loaning and recoveries and exploring new areas linked closely with the farming.

In the current fiscal year, the State Bank proposed a loan target of Rs5bn for the whole fiscal. Against Rs5bn target, the private banks disbursed Rs4.64 billion in just six months from July to December 2004.

More enviable is the recoveries of these private banks which is 115 per cent indicating that not only the due amount of loans have been recovered but the recent advances, which are yet to be due for payment have been recovered.

The private banks are offering production and development loans and credits for buying tractors, fertilizer and agricultural implements. Good marketing and impressive recoveries have enabled the private banks to expand their net credit to almost five times in first half of the current fiscal year.

After adjusting disbursements with recoveries, the private banks extended Rs2.4 billion during July-December 04 as against Rs462.66 million. Mainly because of the limitations and handicaps of lacking a big branch network, the private banks were reluctant to enter agricultural credit market about a few years ago.

But gradual exposure and effective guidance from the State Bank has encouraged the private banks to extend tentacles and reach farmers. "We are far more confident to work with agriculturists now than three or four years ago" an executive of Karachi-based private bank remarked.

Among the agricultural loan providers, the condition of Zarai Tarqiyati Bank (ZTBL which was formerly Agricultural Development Bank of Pakistan ADBP) is most pathetic. It still remains the single largest source of lending for the banks and has undergone in last few years tremendous structural and administrative changes.

The reforms are still being carried out in the ZTBL to improve its reach to the small farmers and also enhance its recovery capacity to a level where it can generate its own resources for future disbursement.

"The board of directors has been restructured and an affective chain of command is being put in place from top to branch level to ensure that genuine small farmers get loans and recovery is hassle free," Syed Qamaruzzaman Shah, the President of the Sindh Chamber of Agriculture informed Dawn on Wednesday from Hyderabad by telephone.

Qamaruzzaman Shah has been representing the farmers in the meeting of Agricultural Credit Advisory Committee (ACAC) of the State Bank for last several years. He attended the mid-term ACAC meeting on Tuesday at the State Bank which reviewed the disbursement and recovery position of the agricultural loans and decided to increase loan target from Rs85 billion to Rs100 billion.

What was distressing to note for the ACAC was less than 30 per cent recovery of the ZTBL during the current fiscal year. As against Rs64.79 billion due for recoveries, the ZTBL could recover only Rs19.30 billion, which is merely 29.80 per cent and is the lowest when compared to all other banks and providers of agricultural loans.

A few years ago, the ADBP officials enjoyed the powers of arresting the loan defaulters under Land Revenue Act. Despite these powers, the portfolio of sick loans of the ADBP reached about Rs100 billion. This has now been brought down to Rs64.79 billion against which the ZTBL could recover only Rs19.30 billion.

The Punjab Cooperative Bank has shown a recovery of about 36 per cent of the recoverable loans. Reports suggest that the Punjab Cooperative Bank may be converted into micro-finance bank.

The five major commercial banks have also shown improved performance in disbursement and recoveries. Their average recoveries is more than 80 per cent and have disbursed about Rs24 billion loans in last six months, which is more than 68 per cent of the entire fiscal year's target.