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.