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Sindh’s shrinking share in farm credit                                  Home
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.

Courtesy: The DAWN;

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