Agriculture

Financing
Presentation By

Banks catering to 3% of the Population 97 %

remains unbanked
78 % Population living in rural areas is devoid of
Banking Services
No Peer Bank Competition in rural areas Cost of
Operations is comparatively low and profit margin
high (credit starved economy)
Agriculture is the main economic activity possess
rich potential for economic growth ranging from
food to fibre.

The extraordinary significance of

Agriculture Sector in the economy of
Pakistan
Contributes
24% GDP
Employees Deployment
52% Labour
Force
Supports Directly Or Indirectly 70% of
Population
Contributes
45% In Exports
Crop
51%
Live Stock
38%
Fisheries, Forestry, etc.
11%

Commercial Viability of Agriculture

Cash Crops
Production
Value at Farm Level
Sector
(Million Tons)

(Rs. In Billion)

23.5

617

Rice

6.1

268

Maize

4.3

108

Sugar Cane

58.0

218

Cotton (Million
Bales)

13.6

347

Wheat

Gross
Source: Govt Statistics.

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Commercial Viability of Agriculture

Sector
Potential

Unlimited more than

Rs.1000 billion market

Scope

Country wide

Yield

18% 20%

Spread
KYC
Cash Flow
Security

5% - 7%
Best

(Revenue Record
Available)
Rich & Visible

Tangible ( 5% to 10% )

Interdependence of Industrial &

Agriculture Sector
Wheat
Sugarcane
Rice
Cotton
Maize
Livestock

Human & Animal Feed / Flour Mills / Confectionary,

Bakery, sweets / Paper & Board Mills
Human & Animal Feed / Molasses / Confectionary, Bakery, sweets /
Paper & Board Mills / Chemical, Plastics & Paints
Human & Animal Feed / Paper & Board Mills

Textile & Textile Composite / Oil mills / pharmaceutical etc

Human & Animal Feed / Oil Mills

Human & Animal Feed / Leather & Tanneries, soaps & detergents

Agriculture & Economy

Strengths

Back bone and main stay of economy.

Provides 80% raw material to local industry.

Major contributor of food, fiber & shelter.
Wide scope, Milk Production 5th in the world. Livestock share is 45% of
agricultural share in G.D.P.
Ample human resource deployment sector.
Contribution to Banks deposit is 25%.
Stationed, Permanently located, secured loaning sector.
Instant borrower history. Small size credit. Low default history.
Shortest gestation period. Short term investment.
Easy to recover, low resistance area, friendly environment.

Weakness of Agri Sector

Lack of institutional credit due to Limited network of financial institution

and reluctance of bankers.
Low or lack of interaction with agriculturists. Poor information about each
other. Lack of extension services.
Non-availability of collateral, particularly by landless farmers.
Extra ordinary profit taking. High rate of interest by informal sector.
Middleman influence, Formal financing in agri sector is expensive.
Unorganized & non-documented sector. Needs / Requirements and
production values not registered.
Remote area, lack of farm to market approach & transportation facilities.
Non-availability of communication services.
Lack of insurance coverage. Crop, asset & life. Hidden strength.

Opportunities in Agri Sector

Government of Pakistan & SBP priority sector.

Farmer needs are much higher than supply of credit. Big gap is available.
Rs.1000 billion required only - Rs.250 billion disbursed.
Easy to lend at higher rate of mark up. Dire need & low resistance.
Ample opportunity of deployment of excess liquidity available in the
Banking Sector.
Commercially viable sector, great credit potential and absorption capacity
in the sector.
Vast range of area of operation. More needs, scope of development, credit
starved sector.
Diversified and multipurpose financing.
Massive migration of labour to cities can be checked / stopped.
Corporate financing will become a niche in lending market.
NGOs outsourcing Agencies, companies are available in the market.

Present & Future Threats to Agri

Sector

Bankers, community reluctance. Fear of default.

Natural calamities. High risk. Water shortage.

Non-friendly attitude, LIP-SERVICE by agencies/functionaries, increasing

taxations public & private enterprises. GST 15% on inputs.

Non-availability of developed NGOs & community organizations. Lack of

research. Out dated farm practices.

Lack of awareness about economics, demand & supply in market.

Poor class, low saving, low holding capacity. Increasing level of poverty.

Loosing soil fertility, intensive use.

Non implementations of land reforms. Continuous divisions.

Non-availability of subsidy, tax holidays as compared to neighbors .

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Financing Schemes
Evergreen Finance
Purchase of seeds, fertilizers, pesticides, Orchards and
Nursery, Manual Sprays, Sericulture, Apiculture and Non
Farm working capital etc.

Tractor Finance
Purchase of New Tractors

Aabpashi Finance
Installation of tube wells, water management equipment,
modules & culverts, lining of water channels, solar
energy plants & pumps, sprinkle and drip irrigation
system.

Green House & Tunnel Finance

Construction of Green Houses & Tunnels for growing
seasons vegetables / fruits in controlled environment.

Livestock Development Finance

Purchase of cattle / milch animals, goat / sheep etc.

Model Dairy Finance

Purchase of Farm Cooling tanks, fodder harvesters, hay

bailers, animal cooling system, any other machinery /
equipment for dairy farming.

Fisheries Finance

Renting / leasing of ponds & tanks, purchase of inputs

i.e. oilcakes/ rice barn, purchase of medicines, nets,
boxes, packing material and any other overhead
expenses.

Farm Mechanization Finance

Purchase of agri implements, power tillers, boom

sprayers, cultivators, riggers, drills, press machines for
wheat straws and dry fodder etc.

Farm Storage Finance

On Farm and Off Farm construction / repair and

renovation (including purchase of machinery, cost of
fixture) Pucca Godown, Storage facility, Bins, Silos etc.

Orchard Finance

Cultivation / growing of fruits / Nurseries, purchase of

seeds, fertilizers, farm machinery / equipment, packing
material, transportation cost, overhead expenses etc.

Floriculture Finance

Cultivation / growing of flowers for decorative / export

purposes, purchase of seeds, fertilizers, labor, packing
material, transportation and over head expenses etc.

Mali Shaulat

Cane Procurement Receipt / Deferred Payment Voucher

discounting / purchase / payment facility

Poultry Finance
Purchase of chicks, feed and raising charges,
construction of sheds i.e. conventional / controlled
environment, machinery, equipment, packing material
and other overhead expenses.

Transport Finance
Purchase of new motorcycles, small pickups, trucks,
auto-trailers, vans and chillers carriers etc.

Best Practices/Innovations
The following key innovative approaches are
effective tools for addressing agriculture financing
challenges:
a. Vision / Mission for increasing outreach with the ultimate goal
of building quality portfolio and profitability of the Bank.
b. Simple and innovative products, i.e. development of demand
driven financial products
c. Cost effective operations control over administrative
expenses and effective use of resources

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d. Standardized & Simple delivery procedures/ methodology

e. Continuous Capacity building to address:

f.

Good governance
Human resource development
Portfolio quality improvement
MIS strengthening
Quick information on repayment & default

Flexible loan terms & conditions e.g. suitable loan repayment

schedule tailored to farm cash flows.

g. Close and frequent monitoring & follow-up.

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Conclusion:
The building cornerstones for achieving success shall be:
1. Efficiency & effectiveness of processes
2. Development of quality services
3. Support for innovation in operation and services
4. Responsiveness to farmers needs

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Thanks

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