Senate Committee Examines Agricultural Financing Gaps

ISLAMABAD: High-ranking officials from the State Bank of Pakistan (SBP) and the National Bank of Pakistan (NBP) recently shared strategies designed to boost agriculture and support the farming community during a Senate committee meeting.

The Senate Functional Committee on Problems of Less Developed Areas convened on Tuesday, led by Senator Agha Shahzaib Durrani.

Senators Syed Kazim Ali Shah, Falak Naz, Danesh Kumar, Aimal Wali Khan, and Hamid Khan participated in the session.

The SBP governor and NBP president offered critical perspectives on agricultural financing within the nation. The committee convened to evaluate the banking sector’s role in promoting agriculture, an industry constituting 80% of Pakistan’s economy, given its status as an agrarian country.

Agricultural Financing in Focus

The committee was briefed on the allocation of agricultural credit through several initiatives, including credit guarantees aimed at bolstering rural finance for marginalized farmers, especially within the livestock and dairy industries in less developed regions. They also assessed how the banking sector supports small and medium enterprises (SMEs) and larger businesses in these areas.

The committee voiced concerns over the banking sector’s limited involvement in fostering agricultural progress, particularly in underdeveloped regions, despite presentations from both the SBP governor and the NBP president detailing plans to assist farmers and promote agriculture.

Senator Durrani emphasized that only 10% of the nation is developed, leaving 90% underdeveloped, and underscored the lack of specific initiatives to rectify this imbalance.

Lack of Awareness and Public Engagement

Senator Durrani, the committee chairman, emphasized the need for enhanced public awareness of the Kissan Package, designed to offer financial relief to farmers. He also observed that private banks treat agricultural financing primarily as a commercial venture, with insufficient regulatory intervention from the State Bank.

Senator Durrani stated, “It is regrettable that the State Bank has not made notable efforts to advocate for agriculture or engage the banking sector on this critical matter.” He further suggested that Pakistan could benefit from adopting international models, like those used in the USA, where specific funds are allocated for underdeveloped areas.

Key Agricultural Credit Disbursement Data

The committee reviewed the latest figures related to agricultural credit disbursement for the fiscal year 2025:

  • Agricultural Credit Performance (July-February 2025)
  • Agricultural loans disbursed: Rs1,654.8 billion (64.3 percent of the annual target for FY25).
  • The outstanding agricultural loan portfolio reached Rs933.2 billion by February 2025, showing a 15 percent growth compared to the previous year.
  • The number of outstanding agricultural borrowers stood at 2.85 million by the end of February 2025, marking a 4.9 percent year-on-year growth.

Regional distribution of loans (July-February FY25):

  • Punjab: Rs1,269 billion (64.3 percent of total disbursements)
  • Sindh: Rs329.9 billion (67.7 percent achievement)
  • Khyber Pakhtunkhwa: Rs39.8 billion (49.6 percent achievement)
  • Balochistan and other regions: Rs16.2 billion

The committee also discussed the Kissan Package, which resulted in the waiver of Rs2.96 billion in interest for farmers affected by floods. This initiative aided 102,663 farmers across Punjab, Sindh, Khyber Pakhtunkhwa, and Balochistan.

Concerns over Funding Distribution

The committee voiced concerns about the unequal distribution of funds, noting that Punjab, not considered a less developed region, received 80% of the agricultural credit. It argued that this distribution overlooks the needs of less developed areas, particularly in tribal regions such as Bajaur, South Waziristan, and North Waziristan.

International Practices and Development Models

Senator Durrani highlighted the necessity of adopting global best practices to tackle the problems encountered by less developed areas. He referenced the achievements of dedicated funds for underdeveloped regions in the United States and recommended that Pakistan consider similar strategies to promote agriculture and rural advancement.

Senator Durrani stated, “Targeted funding and policies are urgently needed to address the distinct challenges of underdeveloped regions. The banking sector plays an essential role, but it requires guidance and regulation from the State Bank.”

Role of the NBP

The president of the NBP highlighted the bank’s position as the foremost lender to the agriculture sector. He confirmed that the NBP provides the lowest markup rates for farming sectors and has launched a widely used digital app in underserved areas to assist farmers.

According to the NBP president, “The NBP is dedicated to supporting the agricultural community financially. Our goal is to reduce the disparities in underserved areas by offering digital solutions and low-interest loans.”

The committee acknowledged that while NBP’s digital efforts are a step forward, the overall advancement in credit distribution to less developed areas remains insufficient.

The Senate Functional Committee on the Problems of Less Developed Areas concluded the meeting by urging both public and private banks to enhance their support for the agricultural sector, particularly in underdeveloped regions. The committee also called for increased collaboration among the State Bank, commercial banks, and government bodies to ensure fair distribution of agricultural credit and the implementation of policies that benefit all parts of the country.

The committee has requested a comprehensive report from the SBP regarding loans provided to farmers, with a specific focus on less developed areas, and has emphasized the need for transparency in agricultural credit allocation.