SBP urges banks to leverage recent initiatives to boost agriculture finance

KARACHI: The Deputy Governor of the State Bank of Pakistan (SBP), Sima Kamil, has advised banks to leverage SBP initiatives to boost agriculture finance.

According to a statement released on Wednesday, the Deputy Governor chaired the quarterly follow-up meeting of the Agricultural Credit Advisory Committee (ACAC) in Karachi.

The meeting reviewed progress on key decisions taken by ACTA at its last meeting held in December 2021, as well as the performance of Agricultural Credit in July-April of FY22.

The SBP Deputy Governor, while appreciating the efforts of all stakeholders in implementing the various ACTA decisions, urged banks to build on recent SBP initiatives and accelerate efforts to boost the agriculture financing and improve outreach, especially in underserved areas.

The meeting provided an update on the new agricultural credit rating model for measuring bank performance adopted by the SBP and reviewed the results of the rating model up to March 2022. Habib Bank Limited (HBL) was in the top of the big banks with a score of 63.7 out of 100; Bank of Punjab ranked first among medium-sized banks with a score of 65.2; Meezan Bank scored 42.4, the highest among Islamic banks; while HBL Microfinance Bank ranks top among microfinance banks with a score of 73.4.

The participants were informed that the scorecards of all agricultural credit banks will be published annually on the SBP website.

Highlighting the overall performance of agricultural credit, Mr. Kamil appreciated the banks’ efforts to disburse Rs. for the year.

However, she noted with concern the relatively slow performance in terms of 1.4% decline in agricultural credit disbursement, compared to Rs 1.074 trillion disbursed during the same period last year and attributed it the slowdown in the performance of certain large commercial and specialized banks.

The performance of medium-sized commercial banks, Islamic banks, and banks and microfinance institutions improved during the year.

The President appreciated the growth in provincial disbursement of agricultural credit to all underserved areas.

Disbursement in Balochistan increased by 73% in the 22 July-April financial year, compared to the 21 July-April financial year, 55% in GB, 43% in AJK, 23% in Sindh and 17% in the KP.

The Chair noted that this improvement was the result of various interventions, including the champion bank model, which was adopted at the last ACTA meeting.

As of December 2021, ACAC had appointed six banks as champions for identified underserved provinces and regions under the champion bank model, which included HBL for Balochistan, HBL Microfinance Bank for GB, NBP for AJK, Bank of Khyber for KP, UBL for Sindh and the Bank of Punjab for the South Punjab region.

The six champion banks updated the committee on the activities carried out in their assigned regions under this initiative and presented their current developments and future action plans.

Kamil, extolled the efforts of the champion banks and urged them to bend over backwards to achieve the desired goals.

Another key decision from the last ACAC meeting was to develop a strategy for promoting electronic warehouse receipt financing (EWRF).

The participants were informed that the EWRF adoption strategy has been developed and its various actions have been implemented, including the creation of an EWRF working group, the signing of service use agreements of banks with the collateral management company, assignment of EWRF targets to banks and capacity-building of stakeholders, among others.

Subsequently, a strategy for promoting climate-smart agriculture finance was also presented by the representative of the Association of Pakistani Banks, which focused on raising awareness among farmers and bankers and also proposed to develop existing products offered by banks in this area.

Presidents and CEOs and agricultural credit teams from commercial banks and SBP officials attended the meeting. The meeting ended with a vote of thanks to the President.