KARACHI, March 10: All the five big commercial banks have promised to disburse Rs21.30 billion credit to the farmers during the current fiscal year as against a target of Rs18.70 billion given to them.

This significant increase in flow of commercial banks’ credit to the farmers is being attributed to the revamping of the agricultural loan schemes and a host of other decision taken by the government.

A manifestation of increasing flow of funds from the commercial banks to the farmers is phenomenal growth of more than 167 per cent in import of agricultural machinery and other implements during the first eight months of this fiscal.

Official trade statistics show the import of agricultural machinery and implement rose to $20.62 million during July-February 2002-03 period, as against the import of $7.70 million in same period last fiscal year.

Mounting demand for credits from the farmers came up for discussion in the State Bank of Pakistan’s Agricultural Credit Advisory Committee, early last month. The meeting was chaired by Governor of State Bank of Pakistan, Dr Ishrat Hussain.

All the five big commercial banks pledged to offer a much higher credit assistance to the farmers than stipulated in the targets fixed for each of them.

The National Bank of Pakistan is reported to have pledged to give Rs7 billion by June next, as against a target of Rs6.20 billion. The Habib Bank has promised to disburse Rs5.70 billion, as against a target of Rs4.80 billion. The Muslim Commercial Bank is giving Rs3.30 billion, as against Rs3 billion; and the United Bank Limited promised Rs2.80 billion, as against a target of Rs2.20 billion. The Allied Bank will remain tied up to its original target of Rs2.50 billion.

All these big banks had reported a fall of 8.6 per cent in disbursement of their loans to the farmers during the first quarter of this fiscal year. Loans disbursement came down to Rs3.72 billion during July to September 2002 period from over Rs4 billion in same period last fiscal year.

The first quarterly report of the State Bank attributed this fall in farm loans disbursement to weakening of the farm loan demand as number of loan applications from the agricultural sector was reported to have dropped by more than 10 per cent. The SBP report attributed the depressed credit demand from the agriculturists to a marked fall in under cultivation of major crops, the pre-occupation of farming community with the elections held in October 2002, and the overall stagnation in agriculture incomes in the last two years.

But a major and decisive factor was the relatively higher lending rate for farmers when the cost of commercial lending has started sliding down.

A major decision to bring down lending rate for the farmers was taken by Punjab Chief Minister Pervaiz Elahi late last year, who brought it down to 9pc from 13pc.

For the last two years, the State Bank has been advising the banks to offer loans for a number of agricultural related activities in addition to production. This is also reported to have pushed up demand for farm loans.

An increase of more than 167 per cent in dollar terms of the import bill for agricultural machinery and implements shows a significant rise in demand for bank money by the farmers.

The agriculture sector is reported to have shown a growth of over 2.5 per cent in first half of this fiscal, and a bumper wheat crop in Rabi is expected to push up further this growth rate.

Shaukat Aziz, Prime Minister’s Adviser on Finance and Economic Affairs, is repeatedly stressing the bankers to explore the agriculture sector, besides consumer banking, construction and other areas to do their business. “Gone are the days when banks earned rental income from 15 per cent rate of return on the Treasury bills,” he told bankers only a day ago. Gone are also the days when clients were approaching the banks for loans. “Bankers will now have to run after their clients,” he said.