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solutions.
Agriculture remains the mainstay of the Pakistan economy. Farming and
related activities accounts for about 25 per cent of our gross domestic
product (GDP) and about 45 percent of our export, Agriculture which
would include farming and allied activities like dairy, poultry,
horticulture, silviculture, sericulture, piscialture etc. employ 50 per
cent of our labour force.
In our country agriculture growth has not kept pace with rising
domestic demand thereby not enabling the country to eliminate food
grains import, although all emphasis has been laid to come over food
problem by producing more wheat which is the major staple diet. The
average growth rate during current decade has been over 4 per cent per
annum as against 2.1 per cent per annum during the first five year plan
(1955-60). The total food grain production which stood at 5.03 million
tonnes in the year 1947-48 has increased to 21.05 million tonnes in
1992-93. This was possible because of the conscious efforts of our
planners by providing requisite priority to the agricultural sector and
affording the necessary policy focus over the years. However, to cope up
current and future food demand as a policy there should have been laid
emphasis on slowing down population growth so that augmenting good
supplies by expanding production could visibly be planned. The fact is
that massive investments in terms of financial resources are required
for modernising Pakistan agriculture for which multi agency approach was
adopted to achieve the envisaged objective. But despite of making all
Major Issues
There is a growing recognition among Pakistan farmers of the effect
of improved inputs and new technology on agricultural yield. The use of
these improved inputs and the adoption of the yield-inducing techniques
have given rise to an increased demand for agricultural credit.
Accordingly the government has established various types of financial
institutions and it has also encouraged the development of credit
schemes including cooperative credit scheme, SACP, Agribusiness and the
programme for the landless poor which is the focus of this paper. During
the past four and a half decades financial services have expanded
It has also been observed that some clients are forced to consume
their "surpluses" or invest them in a very low return
activities while others must skip profitable investment opportunities
because they lack additional liquidity. Thus it becomes difficult to
introduce any innovations successfully typically, a promising innovation
is tried by any of the formal credit institution on a pilot project
basis, but ultimately fails because it cannot reduce cost enough to
overcome the effects on lender revenues of suppressed interest rates.
These kinds of innovations typically increase rather than decrease
costs.
Specialised Banks and Commercial Banks under the directives of the
State Bank or the Federal Government carry out strategies mainly meant
for specific target group in rural areas which alter their performance.
A notable feature of the agrarian scene in Pakistan is the predominance
of small holdings, small farmers, defined as those with land holdings,
up to 12.50 acres in Punjab and NWFP, 16 acres in Sindh and 32 acres in
Balochistan provinces (5 acres in India) constitute 91 per cent of the
total number of farmers in the country though the area commanded by them
is only 42 per cent of the total area. Along with tenants, the share
croppers, small farmers, near landless and the landless account for a
very large proportion of the "Weaker sections" in rural areas.
The objective of the rural finance provided by the banks are to bring
about meaningful improvement in the economic status of the rural poor,
good repayments to bank and increasing saving potential for further
growth. In developing country like Pakistan where majority of population
depends upon agriculture and rural activities by and large, comprises a
large number of small farmers and other weaker sections. There are in
fact few borrowers of the rural areas who can make file best use of the
credit and derive benefits out of its small farmers and other weaker
sections by virtue of their low level of literacy, pressing consumption
needs and poor access to the various employed services and lack of
marketing skills are at various disadvantage in the matter of utilizing
the credit properly. Often they have temptation to sell the produce and
other assets when it proves uneconomical or to misutilise the credit due
to lack of use for development. In short their motivational and risk
bearing levels are also low. In such scenario, if only credit is given
to this type of borrowers, we will be taken chances about the efficient
use of the credit and its recycling. Experiences have proved that such
also which despite of making all out efforts and policy measures still
persists: such as low crop yield per acre, low rate of diversification,
low cropping intensity and land use, incidence of large scale
waterlogging and salinity, subdivision and fragmentation of holding and
high post harvest losses. Finally mechanization of farming still need
improvement in true perspective. Further predominance of small farmers
and other weaker sections of society is another notable feature which
need special attention with utmost care. There are few innovative cum
progressive borrowers of the rural areas who can make the best use of
the credit and derive benefits out of it. Small farmers and weaker
sections by virtue of their low level of literacy, pressing consumption
needs and poor access to the various services viz: extension, supply of
Everybody agrees that by giving credit alone one cannot bring about
improvement in the economic status of the borrowers, because according
to them, for success of credit there has to be proper infrastructure
development, backward and forward linkages and marketing should not be a
problem. Inspite of this, excepting few, they restrict their role only
to provision of credit with the believing that provision of these
facilities, services and assistance is the job of some body else i.e.
the officials of Government department. This hardly happens as the
coordination is left loose. Therefore, this type of approach is bound to
result in the credit being risky to the borrowers and in turn, the risks
are passed on to the banks risks of the clients are the risk of
financing agency. The principles will prove meaningful if nature of
credit advanced is determined keeping in view the following aspects:
In this context, the question arises as to who should ensure that the
above requirements are met. Keeping in view the opportunities available
in the area, the bank should identify the types of corrective measures
and solutions that are possible to satisfy the above factors.
The supervision over the credit should not only be done by the field
officers of the branch managers of the bank, but should also be done by
the Regional Managers, managers for which they are supposed to be mobile
so that the intended type of the lending culture is incalculated among
the branch functionaries and they get the required encouragement,
guidance and support. The supervision does not mean only verification of
the physical existence of the assets.
(The views expressed in this paper are the personal views of the
author and do not necessarily represent the views of the ADBP)
Selected Bibliography
http://www.thefreelibrary.com/Majorissuesinagriculturalfinancingandtheirpossiblesolutions.-a01692
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