ISLAMABAD - Showing displeasure over the decision of acting Governor State Bank of Pakistan to increase agricultural credit disbursement target by Rs 20 billion, the Finance Minister Senator Ishaq Dar said that central bank should further enhance this amount for the promotion of agricultural sector.

He said acting Governor State Bank of Pakistan has informed that central bank has increased the agricultural credit disbursement target to Rs 380 billion from Rs 360 billion, which should be further more in order to promote the agricultural sector. Finance Minister asked the heads of banks and other investors to come out of investing in government bonds and invests in real sector like industry, agricultural and services sectors. He said that country’s foreign exchange reserves would touch $10 billion level by end of March 2014, which would increase to $16 billion by the end of current year 2014.

Senator Ishaq Dar reiterated the government’s resolve to increase the GDP growth gradually to around 6–7pc, investment to GDP to rise from 12.6pc to 20pc, tax to GDP ratio to rise from 8.5pc to 13pc, fiscal deficit to be brought down from 8.8pc to 4pc of GDP and Public debt to be reduced to below 60pc of GDP as per statutory requirement. “Agricultural sector is backbone of the economy, as it contributes 21 percent to the GDP and employs around 45 percent of the total labour force. Around, 68 percent of our rural population is dependent on agriculture sector for their livelihoods”, said Finance Minister addressing a launching ceremony of the 2nd Challenge Round of Financial Innovation Challenge Fund (FICF) on “Promoting Innovative Rural and Agriculture Finance in Pakistan. “Government is working on promoting regional integrity on trade and energy”, he said and added that about several energy projects, for which negotiations were going on with Tajikistan and Afghanistan. He said that Pakistan was talking with Afghanistan to build joint power project at Kunar on the border of both the countries.

He said that the economy of Pakistan was moving on right direction as international agencies have termed Pakistan among the best investment friendly countries and forecast it to become 18th biggest economy by 2025. He said that resolution of energy crisis, restoration of economy and elimination of terrorism were the top priorities of the government.

Senator Ishaq Dar said that currently, the credit to agriculture sector and related activities is still low as it accounts for 7pc of the loan portfolio of commercial banks which is no where near the agriculture’s percentage share in GDP. Similarly, the current agriculture credit outreach at around 2.4 million farmers as against total 8.3 million farm households in the country is also very low. The picture becomes even bleaker in case of small farmers where agri. credit outreach is limited to only 23pc of 5.3 million small farm households. This is due to the fact that outreach of banks is currently limited in rural areas and also due to outdated modes of financing through collaterals such as title documents etc. which excludes the non-farm activities and landless farmers. This also means that the non-crop sector, which contributes more than 50 percent of agricultural GDP, remains neglected in terms of its financing needs.

He reminded the audience of measures taken by PML (N) government in the 1990s that included banking sector reforms in Pakistan, adding that since then, Pakistan’s banking industry had witnessed a major transformation. In his welcome address, Ashraf Mahmood Wathra, Acting Governor State Bank of Pakistan said that financial innovation needs to be targeted towards the productivity of small farmers to combat poverty in rural areas. He said that tackling poverty demanded fundamental rethinking and innovation.  He reminded the audience that improving financial access to alleviate poverty was a global challenge. “More than 2 billion adults in the world do not have access to formal or semi-formal financial services.

At the same time, one billion people with mobile phones do not have even a basic bank account.”

He said that both the Government and the State Bank of Pakistan were addressing the challenge using innovative policy approaches and actions.

Governor SBP said that Agricultural Credit Advisory Committee (ACAC) has approved upward revision in the agri credit disbursement target from Rs. 360 billion to Rs.380 billion for the current year, which is 13 percent higher than the actual disbursement of Rs.336 billion in last year. Emphasising the strategic role of agriculture in ensuring food security, generating economic growth, reducing poverty and inequality, Wathra said that financial services outreach in the rural sector could play the most indispensable role in this regard, he added.

He told the audience briefly about SBP’s initiatives for promoting financial inclusion through agricultural finance. These include: advice to banks to formulate all-inclusive agri. finance policies and set up dedicated agri divisions within banks; revision of per acre Credit Limits for crops, orchards and forestry which were previously set in 2008; Livestock Insurance Scheme for borrowers; and inclusion of 7 microfinance banks into agri. Indicative target scheme.

Saeed Ahmad, Deputy Governor SBP said he was looking forward to receive quality proposals for testing innovative products and delivery channels to cater to the financing needs of the underserved rural and agricultural sectors in Pakistan. 

“The eventual aim of this FICF Round is to identify and leverage on the strengths of existing rural and agricultural eco-system players (such as input suppliers, aggregators, processors, marketers etc.) and use them for opening up newer financing opportunities through formal financial institutions.”

Richard Montgomery, Head of the UK Department for International Development, Pakistan, Noman Dar, President Habib Bank Limited, other Banks’ representatives, Mahmood Nawaz Shah and Mansoor Arifeen, both Members of FICF Advisory Committee also spoke on the occasion.