ISLAMABAD, Oct 1: The government has submitted a proposal to the Asian Development Bank (ADB) for arranging a partial credit guarantee facility up to $35,000,000 in support of investment loans to be made to small dairy farmers in Punjab.

The facility would be the first private sector transaction in the agriculture sector of Pakistan, according to ADB sources. Its output would be in the form of sustained access of dairy farmers to affordable finances, establishment of good quality farmer selection, loan origination, recovery, monitoring practices, and improved farm management practices.

The said proposal was requested by the Punjab government and was endorsed by the federal government.

According to ADB, the credit guarantee facility would cover loans with a tenor of up to five years, and the first credit facility for up to $3 million will partially guarantee a portfolio of loans to be made by a local bank to dairy farmers. It would be issued within four years after the approval by ADB executive board.

The proposed facility will contribute to improving small dairy farmers of high value-added dairy products, scaling up viable banking services for small dairy farmers, and improving dairy farmers’ access to investment capital.

ADB says that the credit guarantee facility supports the development objectives of the government. The ADB country partnership strategy for Pakistan (2009-2013) emphasises the need for reforms, including measures to improve productivity in agriculture and promoting the private sector.

Recent IMF and World Bank reports highlight the farmers’ inadequate access to finance, and capital support through the partnership of banks and agribusiness present a good opportunity for the private sector operations of ADB.