KARACHI, Jan 24: All the banks involved in disbursement of farm credit under the State Bank's scheme offered Rs49 billion agricultural loans in the first half of this fiscal year against the full year target of Rs85 billion.
But as total private sector credit off take reached an all time high of Rs285 billion during this period, the share of farm credit remained at 17.2 per cent only.
Banking sources said five major banks (National Bank, Habib Bank, Muslim Commercial Bank, United Bank and Allied Bank) disbursed Rs23.9 billion farm loans during July-December 2004, against their full fiscal year target of Rs38 billion whereas Zarai Taraqiati Bank or ZTBL disbursed Rs17.25bn against its full year target of Rs34 billion.
The Punjab Provincial Co-operative Bank or PPCB offered Rs3.33bn farm loans in the first half of the current fiscal year against its full year target of Rs8 billion followed by 14 local private banks whose combined agricultural lending in July-December 2004 stood at Rs4.64bn against their full year target of Rs5bn.
These banks are: Askari Commercial Bank, Bank Al-Habib, Bank Alfalah, Bolan Bank, Faysal Bank, Metropolitan Bank, PICIC Commercial Bank, KASB Bank, Prime Commercial Bank, Saudi Pak Commercial Bank, Soneri Bank, The Bank of Khyber, The Bank of Punjab and Union Bank.
One of the reasons why agriculture is getting a very low share in overall private sector credit is that banks continue to ignore majority of small farm loan seekers.
"Almost all banks ignore small farmers. They give loans to big landlords and politicians," complains Dr. Raham Ali Shah, Sindh-based agriculturist and a member of Rice Exporters Association of Pakistan.
"Regardless of what is the stated policy of the banks, at the branch managers level, getting farm loans is too difficult, too cumbersome," he says in a bitter tone but admits that farm lending rate has not moved up with the tightening of the interest rates since the start of this fiscal year in July last.
"Those who manage to get farm loan are still getting it at 8-9 per cent." This means the rate has remained unchanged since July to December 2004, despite a gradual tightening of interest rates by the State Bank during this period to fight rising inflation.
Dr. Shah says that in Sindh, shortage of water, low water tables, salinity and the consequent decline in per acre yield of cotton and other crops have also dampened the demand for farm credit.
"In parts of Sindh, the per-acre yield of cotton has fallen to 15 maunds as compared to an average 35 acres in Punjab. That shows the seriousness of the problems (mentioned above)." Dr. Shah and others also cite higher fertilizer prices as one of the reasons that is affecting the per acre yields.
The off take of Rs49bn farm loans in the first half of this fiscal year suggests that full year disbursement may touch Rs100bn in the current fiscal year up from slightly more than Rs73 billion in the last year.
But even then it would not constitute more than one fourth of the overall private sector credit offtake which seems set to cross Rs400bn mark. The disbursement of Rs4.64bn farm loans by 14 local private banks in the first half of this fiscal year against the full year target of Rs5bn indicates that these banks can be given much larger targets in future.
Similarly, the disbursement of Rs23.9bn farm credit by five major banks in six months against a combined full year target of Rs38bn also suggests that they too can be asked to pace up farm lending.
To ensure that banks do not ignore small farmers while disbursing agricultural loans, the State Bank needs to establish more frequent contacts with representatives of the farming community and the banks engaged in disbursing farm credit.
President of Sindh Chamber of Agriculture Syed Qamaruzzaman Shah who has long been associated with the Agricultural Credit Advisory Committee of the SBP has demanded on several occasions that ACAC should meet at the end of every quarter to get the first hand knowledge about the problems of the small farmers including their inability to get their due share in agricultural loans.