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SBP gives plan to extend credit to farmers

SBP gives plan to extend credit to farmers

KARACHI: For the extension of credit to poor and marginalised farmers, the State Bank of Pakistan (SBP) has given guidelines on the ‘Value Chain Contract Farmer Financing’ for banks.

As per details, the banks are told, by the SBP, to establish a mutual relationship among banks, farmers and value chain agent. Under the ‘scheme’, the farmers would be facilitated to get financing from banks on behalf of processor’s certification and in response processors may get guarantee of getting required quantity of agricultural generation.

Moreover, Value Chain Financing schemes are taken as compulsory arrangements between banks and value chain actors including producers, processors, aggregators and traders through which a farmer ensures supply of products to individual firms. It replaces the traditional requirements by facilitating commercial relations between value chain actors. These elements have been set up by these guidelines including trader credit, input supplier credit, marketing company credit, lead firm credit, and intermediary and responsibilities of stakeholders, financing mechanism, eligibility criteria, types of financing, loan limits, security and collateral, insurance, and loan monitoring mechanism.

In the meanwhile, marginalised farmers with up to five acre land holding constitute 65 percent or 5.4 million as against 8.3 million farm households in the country. Therefore, the SBP, in line with government’s efforts to extent access to finance to small farmers, is working on a number of initiatives that include credit guarantee scheme for small and marginalised farmers, crop and livestock insurance, and warehouse receipt financing. Successful adoption of the scheme would recover depth and spectrum of agri-financing to escalate rural household incomes and economic growth of the country, says the statement.