SBP flags insurance and warehousing gaps in farm lending
Inadequate insurance coverage, the absence of accredited warehouses and limited access to finance are the three main constraints holding back lending to Pakistan’s agriculture sector, State Bank of Pakistan Deputy Governor Salimullah said. Speaking at a session titled “Building the Access to Finance Ecosystem for Pakistan’s Farmers” during the Pakistan Agricultural Coalition’s Agri-Connections Conference and Expo at the Lahore Expo Centre, he said agriculture was the most critical sector of the economy but faced structural barriers to financing.
“The overall level of risk being faced by farmers and the lack of proper insurance coverage is one of the binding constraints,” Mr Salimullah said, adding that the absence of insurance also made banks reluctant to lend to farmers. He said effective insurance coverage was a key issue for both farmers and banks.
He identified the non-availability of accredited warehouses as the second major constraint, saying the agricultural value chain was predominantly informal. “This is also not giving comfort to the banks as to whether they would be able to have control over the commodity or the produce,” he said. Access to finance was the third constraint, he added, saying the SBP was working to develop an ecosystem in which banks’ intervention and investment in agriculture could become a viable business proposition.
At a separate session on investment successes in livestock, Omar Sagga, chairman of Jeddah-based Taraf, said Gulf investors were showing early interest in Pakistan’s meat processing sector, pointing to the country’s human capital and quality livestock. “Investor interest alone is not investment. The ecosystem has to give investors enough confidence to actually commit capital,” he said.
A session on the future of technology in agriculture featured Jehiel Oliver, chief executive of Kenya-based Hello Tractor, who spoke about expanding mechanisation in Pakistan. He said public-sector programmes such as the Green Tractor scheme and manufacturers including Al-Ghazi and Millat were supporting local manufacturing. Mr Oliver said his company had developed a model to connect farmers with farm equipment having excess capacity, allowing farmers to access machinery without having to purchase it. “Farmers should have access to reliable, affordable equipment, but they shouldn’t own their own equipment. That’s a waste of money and a poor use of a farmer’s balance sheet,” he said.
