Ashraf Mahmood Wathra: Financing agriculture in Pakistan
Keynote address by Mr Ashraf Mahmood Wathra, Governor of the State Bank of Pakistan, at
the International Conference on Innovative Agriculture Financing, Islamabad, 28 April 2015.
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Hon'ble Senator Mohammad Ishaq Dar, Federal Finance Minister
Hon'ble Mr. Sikandar Malik Bosan, Federal Minister for National Food Security and Research
Mr. Patrick T. Evans, Country Representative, FAO of United Nations
Mr. Chamnong Siriwongyotha, General-Secretary, Asia-Pacific Rural & Agriculture Credit
Association (APRACA)
Mr. Saeed Ahmad, Deputy Governor, State Bank of Pakistan (SBP)
Our esteemed experts/guests from overseas
Distinguished CEOs/Presidents/Executives of banks, MFBs, Representatives of Farmers &
Business Associations, and Academia.
Colleagues, ladies and gentlemen.
Assalam-o-Alaikum and Good Morning!
1. I extend a very warm welcome to all the participants in today's International Conference on
Innovative Agriculture Financing and to Islmabad. I am particularly grateful to our
international speakers who have taken out time to travel long distances to attend this
conference; and share their knowledge and insights with us on a topic which is crucial to our
national food security, growth and well-being. I would like to express my special gratitude to
our Chief Guest Senator Mohammad Ishaq Dar and Guest of Honor Mr. Sikandar Malik
Bosan whose presence here today is a reflection of the focus and importance that the
country's leadership places on the development of Agriculture sector.
2. Honorable Finance Minister: we are grateful for all the support that you have provided to
the promotion of inclusive finance in the country. We all know that you have great passion
and high commitment for expanding the contribution of agriculture in the economy. In line
with your vision of a progressive and equitable economy, the Government has initiated
unprecedented programs and schemes for the promotion of financing to agriculture,
especially to small farmers. SBP and banks are striving to optimally leverage these initiatives
to make far-reaching impact on financial inclusion and economic development.
3. Honorable Minister for Food Security, Mr. Sikandar Malik Bosan: The importance of your
office and its contributions to the development of agriculture sector are widely acknowledged.
The crucial role that your Ministry is playing for the growth and development of Agriculture
with special focus on providing relief to small farmers by linking them to the market;
introducing cutting edge farm technology and state of the art high yield seed varieties and
numerous other innovations for the promotion of agri-based exports for the uplift of
agriculture in the country.
Ladies and Gentlemen,
4. Majority of the world's poor, an astounding number of over two billion people share one
common profession: farming. But where agriculture harbors so many of the world's poor; it
also offers the key to graduate economies out of the vicious cycle of poverty and food
insecurity. Beyond direct links to rural livelihood, agricultural sector has strong links to rest of
the economy, and this is one of the most powerful ways in which it generates overall growth
and reduces poverty. Empirical evidence suggests that investment in agriculture is 2.5 to
3.0 times more effective in increasing the income of the poor than is non-agricultural
investment. Based on this premise, State Bank of Pakistan (SBP) is making relentless efforts
to promote agriculture finance.
My dear fellows and colleagues,
5. In our efforts to promote financial services to the agriculture-based community, we are
faced with the challenge of removing numerous stumbling blocks to meet the financial needs
of the agri-sector.
6. However, with the Grace of Allah Almighty, the financial sector has not only stood strong
against these challenges but has also registered remarkable growth. Over the years, we
have moved away from the 'mandatory-credit regime' where force-feeding of targets to highly
regulated commercial banks was the norm; towards a more open and 'market led' model
where State bank has adapted itself into the role of a facilitator and developmental partner of
financial institutions to accelerate the growth of agriculture finance in its natural eco-system.
7. Today, more than ever before, banks are successfully exploiting business opportunities in
agriculture financing. We started off with a hand-full of banks as reluctant financiers of
agrisector but now we have 33 institutions, including Islamic and Microfinance banks that are
providing financing efficiently to their agri-clientle.
8. Agri credit has demonstrated a consistent rise with annualized average growth rate of
16.2 percent for last three years. As a result agri credit increased to Rs 391 Billion in 2013-14
with Agriculture Credit Advisory Committee (ACAC) pushing the limits to even more
aggressive credit disbursement target of Rs 500 Billion to be achieved during FY 2014-15. It
is encouraging to note that banks have already disbursed Rs 326 Billion during the first
9 months, which is 65% of the target of FY 14-15, and is 28 % higher than the same period
last year.
It is also heartening that the portfolio quality of banks agri portfolio has also improved over
the recent period. I believe that the banks would be able to further improve the portfolio
quality of agri-lending by using innovative lending models supported with their experience
curve.
9. It has been through the collaborative efforts of all stakeholders that the banks have
improved their actual agri disbursement to financing requirements ratio from 37% to 53%
over the last 5 years and we are working to improve it even further so that more and more
farmers can free themselves from the shackles of exploitative informal credit.
In order to make it happen, SBP has taken initiatives to promote agri-financing to bring
depth, inclusion, efficiency and stability into the system:
Innovations in agri-financing are being promoted by adoption of value chain and
•
warehouse receipt financing through constant guidance and pilot projects.
• Enhanced risk management through crop and livestock loan insurance schemes
and credit guarantee schemes, to help banks venture into providing financing to
farmers, particularly the smaller ones.
• SBP has been extensively involved in capacity building of farmers through offering
financial literacy programs and financial service providers, through engagement of
local and international experts who are helping the financial service providers to
tailor their approach for improved service delivery and increased profits.
Distinguished guests!
10. Yes State Bank views positively at the recent increasing momentum, but we should not
lose sight of the fact that our long journey in agri-credit market has just started. In this
context, I feel we will be wrong if we say that Rs. 500 billion is a big target. Let us not forget
that this is only 53% of our credit demand.
11. Going forward, the most critical challenges are inclusion of majority small and
marginalized farmers, addressing geographical imbalances and financing to non-crop
activities, which will lead to enhancing the share of agri credit in banks' advances. SBP is
committed to continue its efforts to deliver real benefits to the farming community and it is
hoped that with the joint efforts of policy makers and the industry, agri-financing would soon
emerge as a sound, scalable and sustainable business segment for banks in Pakistan.
12. In the end I would like to sincerely thank FAO for their remarkable support in
collaborating with SBP for organizing this event. FAO has long played a strong role for the
development of agriculture sector in Pakistan through introduction of innovation and technical
assistance and this event is a mark of their continued commitment to the cause of developing
an exceedingly vibrant agriculture sector in Pakistan. I am also grateful to UKAID for their
continued and long-term support to advance financial inclusion in Pakistan. Let me also
express our gratitude to Asia-Pacific Rural and Agricultural Credit Association (APRACA) for
the importance and attention that you always give to Pakistan and SBP in the regional
initiatives.
Ladies & Gentlemen,
13. I wish you all a pleasant participation in the conference and hope that this experience will
invigorate the spirit of transformation that challenges the conventional beliefs and fosters
innovative thinking to find lasting solutions to the problems of agriculture-financing.
Thank you our Chief Guest Senator Muhammad Ishaq Dar, Finance Minister, and the Guest
of Honour Federal Minister Mr. Sikandar Malik Bosan, and all the participants and speakers!