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Date-57c45f79cd7168 63436939 PDF
Date-57c45f79cd7168 63436939 PDF
The major institutional sources of farm credit are ZTBL, Commercial Banks,? Cooperative Credit and
Taccavi Loans.
(1) The Zarai Taraqiate Bank Limited (ZTBL) formerly known as Agricultural Development Bank of
Pakistan (ADBP). The ZTBL was established in 1961 through the merger of Development Finance for
the supply of credit to agricultural credit. The Pakistan. It contributes over 32.9% of the national
institutional agricultural credit. The ZTBL provides short, medium and long term loans for farm and
off farm activities. The Bank has five windows of investment (1) Development loans (2) Production
loans (3) Agri-business loans (4) Cottage industry loans and (5) Off farm income generating activities
loans. It provided about Rs. 34 billion as agricultural loans to farmers during the year 2006-07.
1. Less Flow of credit to small farmers. There are millions of small farmers throughout the country.
In spite of expansion of institutional rural credit, the gain has reached more to the big landlords. It is
therefore, an urgent need that the credit should reach the small farmers who are the backbone of
agricultural industry.
2. Complicated procedure for advancing loans. At present, the procedure for advancing loans by
institutional sources is quite complicated. The loans are advanced to the farmers on the basis of pass
books which contain the details of land owned by the farmers. The procedure is quite complicated.
3. Delay in the disbursement of credit. The procedure involved for advancing loans to the farmers is
cumbersome. Who-so-ever succeeds in completing the documents is entitled to receive loans. It has
been observed that the disbursement of credit is farmers are after it has been approved. It is a
serious problem which the farmers are facing these days. One window operation started by ADBP
has solved this problem to some extent.
4. High interest rate. The interest charged by the various institutions on farm credit is high. The low
income farmers cannot bear it. As regards the interest-free loans, they are not reaching the small
deserving farmers. These loans are being misused on large scale through proxy loaning, family
loaning and paper loaning.
5. Amount of bad debts is increasing. The loans advanced particularly to the big landlords are not
being repaid to the institutions. Since the big landlords have political influence, they therefore
manage to get them written off.
6. Reaching the small farmers is expensive. The financial institutions which provide rural credit
avoid to advance loans to the small farmers. It is because of the fact that the procedure involved in
advancing loans is cumbersome, complicated and expensive.
7. Provision of loans for marketing storage, processing of agricultural produce. The various financial
institutions are trying to provide loans to the farmers mostly for the purchase of seeds, fertilizers,
pesticides, tractors, etc. There is a considerable need to provide loans for marketing, storage and
processing of agricultural produce.
The Government of Pakistan has taken the following measures for solving the problems of rural
credit in the country.
1. Establishment of Zarai Taraqiate Bank Limited (ZTBL). The ZTBL was established in 1961 through
the merger of ADFC and ABP . The ZTBL provides rural credit to the farmers through 49 regional
offices. 343 branches and 1459 credit mobile officers (MCOs). Each mobile credit officer (MCOs) in
the Supervised Credit Scheme of the Bank is in charge of 10 to 15 villages. The ZTBL advances loans
on the vases of land mortgage or on personal security. Though the operation of ZTBL has reached
38500 villages out of 45000 yet the number of farmers availing of loan facilities particularly the
small garners is small. The ZTBL disbursed 33% of the total loan to agriculture sector in 2006-07.
2. Role of commercial banks. The commercial banks were inducted in the field of rural credit under
Banking Reforms Act of 1972. The banks provide loans to the farmers for meeting their short-term
and medium term requirements. These requirements include purchase of inputs, cattle dairy farming
rural gardening installation of tube-wells, etc. The commercial banks advance loans both under the
Supervised Credit Schemes and outside the Supervised Credit Scheme. The share of commercial
banks has surpassed the share of ZTBL and was 49% in the year 2006-07.
Cost Free Production loans. The commercial banks are also advancing cost free production loans
farmers. These loans are generally in kind and are given for seeds, fertilizers, pesticides, land
sprayers. There is a complaint that deserving farmers are not benefiting from these loans. There is a
large scale misuse of funds through proxy loaning.
3. Role of cooperatives. The provincial cooperative banks and the cooperative societies are providing
loans to the small farmers at low mark up. With the winding up of Federal Cooperative Bank in 2000,
the provision of credit to agricultural sector has received a set back. The share of cooperatives in the
total agriculture credit was only 5% in 2006-07.
4. Taccavi loans. Taccavi loans are handled by the Provincial Revenue Departments. Necessary funds
are allocated for different areas in the provincial budgets. Taccavi loans are given to the farmers at
the time of calamity such as floods, destruction of crops due to scanty rains, bad harvests, etc.
5. Role of State Bank in agricultural financing. The SBP is playing an active role in improving the
quantitative and qualitative targets of rural credit, briefly.
(i) Agricultural Credit Department was set up in 1956 for research and assessment of credit needs.
(ii) The SBP introduced Refinance and guarantee scheme in 1970. The Bank under this scheme bears
50% losses on loans advanced to agriculture.
(iii) In order to increase the share of commercial banks in the rural credit. a Mandatory Credit
Target Scheme was introduced in 1972.
(iv) The Interest-Free Production Loans Scheme was introduced in 1976 by SBP.
(v) A share of 75% of loans has been allocated to small farmers holding land up to 25 acres.
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