KARACHI: The State Bank has issued guidelines to ensure credit to farmers for efficient water management system in the wake of climate changes, scarcity of usable canal water availability, wastage of water and depleting underground water tables which are the challenges to the growth of agriculture in the country.

For the last two years the floods have caused huge agriculture losses and the water management also failed to coupe with the situation.

The State Bank on Wednesday said it issued guidelines to ensure availability of credit to farmers for the purchase andmaintenance of water management systems and techniques.

The main objectives of these guidelines are: to make efficient agriculture water management techniques commercially viable for stakeholders including banks; to facilitate banks in developing products for efficient agriculture water management techniques; to encourage and facilitate banks to provide working capital and term finance to farm and non-farm sector activities for utilisation of efficient agriculture water management technologies; and to encourage farmers to adopt modern and efficient farming techniques and to increase the productivity of crops.

The SBP said adoption of modern water management techniques by the farmers was necessary to ensure optimal water utilisation for soil fertility and better yield.

The guidelines, which have been developed by the State Bank in consultation with the stakeholders, are aimed at facilitating banks in developing specific products for the purpose.

“Banks may adopt the guidelines in the present form or with some adjustments to suit their organisational and operational needs and market characteristics, subject to compliance with SBP’s regulations for agriculture financing,” said the SBP.

According to the guidelines, individuals and all types of legal entities engaged in crops, horticulture, floriculture and other agriculture production activities or desirous to establish such new projects with sufficient knowledge and relevant experience are eligible for loan under the financing scheme.

The financing will be provided to meet working capital and term finance requirements for purchasing of tools and equipment and running expenses of the agriculture water management systems including the necessary toeing machinery for operating equipment, for example a tractor, etc.

The guidelines stipulate that to meet day-to-day expenses for functioning and maintenance of water management systems, working capital financing can be provided on revolving basis for all activities related to efficient water management.

The term finance facilities can be provided for medium- to long-term credit needs of the water management system.

The loan limit will be assessed by the bank keeping in view the borrower’s profile, feasibility of the business, cash flow, etc., as per bank’s credit policies, the guidelines said, adding that the bank will also take into consideration any government or donor funding, if availed by the borrower and will allow balance payment as a loan to the farmer, net of government or donor subsidy or funds.

Banks should undertake due diligence and market survey to assess the cost of equipment, vehicles and all other goods, the guidelines added.

With regard to mark up, the guidelines said that banks will determine mark up rate keeping in view Kibor rate and their cost of funds, etc. in line with their credit policy and shall not charge any penalty on early repayment or adjustment of loans by the borrower.