May 05, 2008	Monday	Rabi-us-Sani 28, 1429

The State Bank of Pakistan (SBP) is working on a strategy to increase the flow of bank credit to rural areas-- farms and non-farm sectors—anticipating a surge in demand as growers start collecting much better returns for their produce from the domestic and foreign markets.

‘’The State Bank now wants to push up agricultural credit to Rs500 billion a year by 2011 from the targeted Rs200 billion for the current fiscal year,’’ said an official of the Agricultural Credit Department of a bank. Based on prices of agricultural inputs, better quality seeds and modern agricultural implements and fertiliser demand, he reckons that Rs500 billion credit may also eventually prove to be insufficient.

Incidentally, the British institution, DFID has recently approved a 50 million pounds grant to optimise financial services for the agriculturists.

Many bankers however consider a quantum jump of more than 100 per cent in agricultural credit in next few years as, ‘’too ambitious and impractical.’’ They believe that there was not enough capacity in rural areas to absorb such a big amount of capital.

‘’For decades, the resources have been flowing from villages to the cities’’, argues Khair Mohammad Junejo, a former federal minister and a progressive farmer from Sanghar in Sindh. He says time has come to reverse flow of capital from cities to villages. He is convinced that agriculture has a huge potential for investment.

Junejo says the villagers are enterprising. He quoted the example of one his tenants who suffered crop failure. With a small saving and credit from informal sector, he bought five buffaloes that were declared dry. He fed them for about six months and got them inseminated. On delivery of the calves, the buffaloes started giving milk again and his tenant got more than double the amount he spent on their buying, feeding etc. ‘’There is hardly five per cent mortality in livestock,’’ he said, pointing out that there is no insurance cover. The livestock farming has tremendous potential to offer attractive returns to banks as well as to the insurance firms. Nothing tangible has been done so far to provide credit for livestock farming or proper insurance cover.

The proposal for offering crop insurance from the next Kharif by the state-run organisations-the National Insurance Company and the National Bank of Pakistan--has hit snag again. Under the provision of Insurance Ordinance-2000, no bank can ask its borrower to seek insurance cover from any particular company. ‘’Annulment or amendment of the Sec 86 of the ordinance warrants legislation’’, explained an official who said that it was lengthy process.

The SBP Governor, Dr Shamshad Akhtar is unhappy over the low priority being given by commercial banks to agriculture. She regretted that agriculture’s share was hardly four per cent of the banks’ total debt portfolio.

The falling share of Sindh’s farmers in the national agriculture credit from 21 per cent in 2000-01 to just to 11 per cent in 2005-06 was also a matter of concern for the State Bank. Some improvement in credit off- take is said to have been noticed in 2006-07 and 20007-08 but a lot is needed to be done in the province.

Special directives have been given to the revenue departments of Sindh and Balochistan to create an enabling environment for agricultural credit in their provinces. Land ownership record in both the provinces is hard to find and the move to computerise land ownership record is making no headways. A recent outbreak of fire in Sindh Revenue department destroyed much of the revenue records.

The province is unable to seize opportunities to get assistance for the farms and non-agriculture farms sectors. The Asian Development Bank has initiated an agriculture finance development project in collaboration with the federal food, agricultural and livestock ministry. A Federal Livestock Dairy Development Board has been set up. An Agricultural Support Fund has also been instituted.

In 2006-07 budget, Sindh raised livestock and fisheries allocation by 637 per cent to Rs1.85 billion from a mere Rs251 million in 05-06 budget.

But fish harbour remains dirty as ever and its hygienic conditions attract restriction on export to the European Union. Hardly any beginning has been made to launch a Rs3.32 billion livestock project for dairy products and meat supply near Karachi.

Nothing has been done to set up model fishermen villages for which an allocation of Rs500 million was made. There was also a plan to establish fish hatcheries at a cost of Rs335 million. No progress has been reported.

‘’Let’s hope the new political leadership will pick up the thread to infuse hope and confidence in the rural population by taking up all these dead projects anew’’ an official in the Planning and Development remarked.

There are many studies and survey reports available on investment potential in crops related areas and non-farming sector. There is a 227 page comprehensive EU-sponsored report on investment potential in dairy farming, fruit and vegetable canning, juices, orchards and other areas.