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Sindh’s shrinking share in farm credit
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By Sabihuddin Ghausi
SINDH is gradually losing its share in agricultural credit
which is being attributed to the limited availability of
farmers’ passbooks, the lack of cooperation by the
provincial revenue departments to verify these books,
issuance of bogus passbooks and closure of the Sindh
Provincial Cooperative Bank.
 From
a 21 per cent share in the national credit disbursement in
2000-01, Sindh’s share, dropped to a mere 11 per cent in
2005-06 and bankers are convinced that it has declined 10
per cent in the first half of the current fiscal when
overall credit disbursement is 45 per cent of the officially
fixed target of Rs160 billion.
“The enhanced cooperation by the Sindh Revenue Department
and automation of land records in the medium term, could
bring improvement in flow of funds to the sector in the
province,’’ an official document of the federal government
observes declaring that Sindh has immense potential to
attract flow of institutional credit.
The position of Balochistan for attracting credit inflow is
dismal where only 0.4 per cent disbursement was made against
a target of 1.5 per cent growth. Bankers attribute low
agricultural credit demand in Balochistan to continuation of
drought like conditions which caused a slump in recovery,
and hence the problems in sanctioning of new loans and
disbursement.
Agricultural credit disbursement in Pakistan is
characterised by growing regional and provincial
disparities. In July 2005, the Agricultural Credit Advisory
Committee (ACAC) took notice of these disparities and
allocated province-wise targets based on cropped areas to
ensure inflow of adequate flow of institutional credit in
the four provinces.
“Instead of narrowing down these disparities, the new system
has further aggravated the situation as farmers in Punjab
have availed 82 per cent of the total disbursement against
the target of 78 per cent,’’ an official document reveals.
According to this document farmers in Sindh availed 11 per
cent of the proposed 14 per cent increase in agricultural
credit target in 05-06. The NWFP availed 5.3 per cent of the
allocation of six per cent and Balochistan got only 0.4 per
cent credit against 1.5 per cent allocation. The Azad Jammu
and Kashmir and FATA received only 0.3 per cent of
agricultural credit from 0.5 per allocated share.
While agrarian scenario in Sindh, Seraiki belt of Punjab and
Balochistan is dominated by big landlords and sardars, who
manipulate land title record with the active connivance of
the Revenue Department officials to prepare bogus passbooks
in the name of farmers of small land holdings, the vast
tract of agricultural land remains uncultivated.
Big landlords do not pay even one-tenth of due “abiana’’ and
repeated requests made to Sindh Irrigation Minister Nadir
Akmal Leghari to give some information on collection of
water tax failed to bring any response.
In the central Punjab, the land holding is fragmented, and
is owned by those who are well represented in army and in
civil service as well as in private services and business
and hence the central Punjab farmers enjoy all the state
facilities for agriculture and credit. No wonder then
Punjab’s share in cropped area is 72 per cent of the whole
country, 69 per cent in major crops, 71 per cent in
livestock. The Punjab farmer is well supported by its
Revenue Department and has relatively easy access to about
4,000 bank branches network, almost 57 per cent of total
country’s banking system.
“Above all, there is far better recovery of agricultural
loans in Punjab,’’ argued a banker who disclosed that the
Sindh Provincial Cooperative Bank was closed down sometimes
in 1989 because influential “waderas’’ borrowed over one
billion rupees and defaulted on its payment. “The interest
amount far exceeded the principal amount,’’ said a leader of
Sindh farmers. For last several years, the Sindh government
has announced the setting up of a micro finance bank for
farmers but the stories of infamous Mehran Bank and its
links with security agencies and politicians still haunts
the memory of Sindh government officials.
In 2005-06 Sindh’s share in total Rs137 billion agricultural
credit was only Rs14.83 billion (10.79 per cent) ,
Balochsiatan Rs555 million (0.40 per cent), the NWFP Rs7.26
billion and the AJK Rs302 million. Punjab got the lion’s
share of 82 per cent amounting to Rs114.37 billion. Punjab
is the only province to receive Rs857 million corporate farm
loans. There is no demand for this loan in Sindh,
Balochistan and the NWFP.
The last meeting of ACAC on February 13, did express its
concern over the slow tempo of agricultural credit
disbursement but mysteriously remained silent on the growing
regional and provincial disparities. Bankers wonder as to
why the Governor of State Bank of Pakistan, Dr Shamshad
Akhtar, expressed her dissatisfaction over “slow growth’’ of
disbursement of farm loans in the first half of the current
fiscal year when almost 45 per cent of Rs160 billion target
loans have been disbursed and they expect to get
applications for major kharif crops—cotton, sugarcane, rice,
maize etc. in next few weeks.
The SBP Governor was unhappy that only 45 per cent of the
loan target had been achieved and she urged the banks to
“take necessary steps to accelerate the pace of credit
disbursement to the agriculture sector during the coming
months so that full target of Rs160 billion was achieved’’.
“She should have spoken on province-wise agricultural credit
disbursement in last six months,’’ a banker said.
“We have already written to the State Bank of Pakistan of
meeting our loan disbursement target before June,’’ an
official of the United Bank said. The UBL is given a farm
loan disbursement target of Rs12 billion which is 50 per
cent more than that of last year at Rs8 billion. In first
half of the current fiscal, the UBL gave away Rs4.29 billion
as against Rs4.46 billion advanced to farmers in first half
of 05-06, a decline of about four per cent.
“The small decline in loan disbursement is due to some
recovery problems in Balochistan,’’ he explained. But he was
confident that the UBL would disburse loans to cotton
growers and other farmers to achieve Rs12 billion loan
target for the current fiscal year 06-07.
Equally confident was an officer of the Habib Bank that put
up the most dismal performance of farm loan disbursement as
its advances to the farmers in the first half of 06-07 was
19.44 per cent less than loans given in the same period of
last year. No senior officer—President Zakir Mahmood, or the
head of agri department—was available to give any
explanation but a junior officer said that big demand comes
in summer for kharif crops and his bank would hopefully meet
the target of Rs25 billion. By December 2006, the HBL had
offered Rs9 billion loans to the farmers.
All the five major banks were given a target of Rs80 billion
which is 27 per cent more than Rs63 billion target given in
05-06. Out of this target, the five banks advanced Rs34.28
billion in July to December period which is 2.31 per cent
more than that of last year loaning.
Overall, the five banks and other institutions have advanced
Rs71.68 billion to the farmers in the first half of 2006-07
which is 45 per cent of Rs160 billion target. Bankers are
confident of advancing about Rs87 billion to farmers who
will soon be seeking loans for cotton, sugarcane, rice,
maize and few other small crops plus for infrastructure
development of agriculture.
All said and done, bankers in the five top banks and other
private banks are reluctant to offer farm loans mainly
because of the administration problems and recovery issues.
“Unlike the urban borrowers, the rural borrowers are
scattered in vast rural areas and difficult to reach when
recovery time comes,’’ explained a banker who said that
after nationalisation in 1974, the bankers “reluctantly took
up the responsibility of advancing farm loans’’.
Farm loans became a function of secondary importance for the
bankers after government officially patronised consumerism
about three years ago, and banks were asked to finance
purchase of cars, motorcycles, electronic goods and
construction and purchase of houses and flats. The ratio of
personal loans, auto credits and for house purchase is
gradually increasing.
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Courtesy: The DAWN
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