Pakistan’s agricultural sector receives substantial credit boost

In a significant development for Pakistan’s agriculture sector, banks have disbursed a notable sum of PKR 1,776 billion ($6.3mn) during the financial year 2023 (FY23), primarily for the procurement of fertilizers and other agricultural inputs. The State Bank of Pakistan (SBP), in a meeting held on December 14, stressed the importance of the agriculture sector and urged lending institutions to provide farmers with effortless access to a range of financial services, including credit, deposits, and payment solutions.

Governor of the SBP, Mr. Jameel Ahmad, in his address at the annual Agricultural Credit Advisory Committee (ACAC) meeting, pointed out that despite challenges such as floods, agriculture credit disbursements achieved an impressive 97.6% of the set target, reaching PKR 1,776 billion ($6.3mn) in FY23. This amount represents a significant 25.2% year-on-year growth, nearing the overall target of PKR 1,819 billion ($6.46mn). Mr. Ahmad lauded the collective efforts of various financial institutions that contributed to this achievement, highlighting the sector’s resilience and adaptability.

Looking ahead, Mr. Ahmad conveyed optimism about the agriculture sector’s recovery, anticipating a potential real GDP growth of 2-3% in FY24. He announced a heightened disbursement target of PKR 2,250 billion ($7.991mn) for FY24, marking a 26.7% increase over the previous year. The encouraging performance in the July-October 2023 period, with a growth of 30%, fuels confidence in meeting and even exceeding this target.

Addressing the challenges, particularly the attrition of borrowers, the Governor informed that the SBP would work closely with each bank to develop tailored strategies for sustainable growth in agricultural borrowers. He advised banks to enhance their agrifinance capabilities and form partnerships with Microfinance Institutions (MFIs) to expand the reach of agricultural and rural finance services.

ADVERTISEMENT

Recognizing Pakistan’s vulnerability to climate change, the Governor underscored the SBP’s green initiatives, including the Environmental & Social Risk Management Implementation Manual, the Financing Scheme for Renewable Energy, and Green Banking Guidelines. He called on the banking sector to proactively tackle climate change through risk mitigation, insurance schemes, and collaborations with international donors. These efforts are essential in addressing the diverse challenges posed by climate change, particularly in the agriculture sector.