KARACHI: Credit to agriculture sector increased by over 38 per cent during 2017-18, inching closer to Rs1 trillion mark.

The double-digit growth during the fiscal year highlights vast potential for banks to penetrate further into the sector.

According to the data released by State Bank of Pakistan (SBP) on Thursday, the banks lending to the agriculture sector soared to Rs972.6 billion in FY18, an increase of 38.1pc over last year’s Rs704.5bn.

The central bank noted that the achievement of agriculture credit disbursement was a challenging task in the backdrop of various real side challenges such as water shortage, low production of maize and wheat, price volatility and high cost of production.

Furthermore, outstanding portfolio in agriculture sector also increased by 15.6pc to Rs469.4bn during the 2017-18.

The SBP said agricultural credit outreach also widened to 3.7m farmers during the year, up 13.8pc from last year’s 3.2m.

The analysis of agriculture credit disbursement reveals that five major banks collectively disbursed Rs523.9bn (or 101.5pc of their FY18 target of Rs516bn) up 52.9pc from Rs342.6bn disbursed in the preceding year.

Under specialised banks category, Zarai Taraqiati Bank disbursed Rs83.2bn, achieving 66.6pc of its annual target of Rs125bn while Punjab Provincial Cooper­ative Bank Ltd disbursed Rs10.7bn by achieving 71.5pc against its target of Rs15bn during the year.

Fifteen domestic private banks in total achieved 92.4pc of their Rs200bn target and five Islamic banks achieved 82pc of their cumulative target of Rs20bn.

Additionaly, the performance of Microfinance Banks and Microfinance Institutions was visibly encouraging which collectively surpassed their annual targets by disbursing Rs124.8bn and Rs28.7bn respectively to small farmers in 2017-18.

The SBP said that it has made concerted efforts towards achieving the agriculture credit disbursement target and implementing various budgetary initiatives set by the government.

Some of these efforts, which were highlighted in the SBP report included; provision of enabling regulatory environment for agriculture lending institutions; sensitising banks to adopt agriculture financing as a viable business proposition; exploring new avenues of financing; value chain financing; digitalisation of credit; warehouse receipt financing; and implementation of credit guarantee scheme for small and marginalised farmers etc.

Published in Dawn, August 10th, 2018