Agriculture Brief

THE BANK OF PUNJAB CREDIT POLICY DIVISION

AGRICULTURE CREDIT POLICY PREAMBLE: Agriculture is the mainstay of country's economy and is the most important sector for employment and income generation. The development of Agriculture can increase econoniic growth and reduce poverty by creating job opportunities and providing necessary economic and social services to poor.

It is considered to be the largest sector and driving force for growth and

development of the country. Agriculture sector constitutes 23% of the GDP, accounts for 42% of the total employed labour force and contributes 80% of country's total exports earnings along with agro-based products. Almost 70% of Pakistan's population lives in rural areas and their livelihood revolve around agriculture and i t s allied activities. For Pakistan to have a balanced economic structure, it needs an efficient growing and developed agriculture sector. All indicators for sustained social and economic development depend on i t s viability and vibrancy. It goes without saying that

meaningful development of the agriculture sector requires

exponential growth in investment. For a sustained growth of 6% to 7

O/o

per

annum, an aggregate credit allocation of a t least Rs. 450 billion per annum is required by the Agriculture sector.

Central Bank of Pakistan has been encouraging banks to step up there efforts for providing systematic .flow of credit to this sector of the economy by introducing targeted agricultural, micro and rural financing programs. lnfact a t present, nearly 5% of the urbanized population (out of 30%) is being provided banking services, while a huge majority of small farmers, with meager resources, amongst the 70% of the population living in rural areas are still meeting their financial requirements through informal sources of finance a t exorbitant mark-up rates.

THE BANK OF PUNJAB CREDIT POLICY DIVISION

We believe that credit expansion in the agriculture sector will not only curb the ever increasing food inflation domestically,

by controlling the costs of

production which would be reduced as a result of deployment of formal sources of finance a t affordable rates, but will also make some of our crops, vegetables, fruits and livestock related products competitive for exports.

Looking a t the present scenario, there is a great potential for Banks to market their products and services in rural areas by developi~igpolicies, procedures and guidelines for their agriculture and rural banking operations. Our prime objective is t o develop a solid customer base by focusing on small scale farmers by understanding the dynamics of economic activities that operate in the rural areas as well as other players linked with agriculture through the value chain businesses.

The positive synergies which can be developed under agriculture and rural business operations can also help in implementing micro and Islamic lending programs which eventually will open new avenues of business opportunities for the Bank. ROLE OF AGRICULTURE IN POVERTY ALLEVIATION: Poverty in Pakistan is more of a rural phenomenon than urban; therefore, development of agriculture will be the main vehicle for alleviating rural poverty. The recent food crisis, which created difficulties globally and specially for food importing countries, is an indicator of the importance and potential for this sector,

domestically as well as internationally. Higher agricultural growth,

particularly emanating from the crop sector as well as the livestock sector will provide food security by increasing supply, stabilizing prices and raising incomes of poor farm households, besides the potential for exports.