State Bank of
Pakistan (SBP) and all the financial institutions that extend loans to the agri
sector deserve appreciation for meeting the indicative target of Rs600 billion
set for FY16.
The amount disbursed
FY16 is 16 percent higher as compared to FY15. The SBP deserves real
appreciation because during this period farmers were not keen in boosting the
output due to the lower commodity prices.
I am a staunch
believer that if the Government of Pakistan (GoP) is serious in boosting GDP
growth rate as well as achieving food security it has to remove the impediments
affecting agri out. Analysts have the consensus that agri output can be doubled
without bringing additional area under cultivation.
It is no secret that
the biggest hurdle in achieving food security is colossal post-harvest losses
ranging from 15 to 40 percent for different crops. Two factors responsible for
these losses are: 1) absence of modern warehouses and 2) inefficient logistic
system. Extension of loans to farmers may have helped in increasing production but
certainly not helped in containing the post-harvest losses.
Nearly three years
ago, the SBP had circulated the draft rules for Warehouse Receipt Financing.
The second set of draft regulations has been issued by Securities &
Exchange Commission of Pakistan (SECP) in June this year. While one may
question the logic behind issue of regulations by both the apex regulators, the
real point of concern is that the focus of both the regulators is not the two
staple food grains i.e. wheat and rice.
It is highly
deplorable that the total output of wheat, rice and maize touches 40 million
tons annually but all sorts of warehouses put together can’t store even
one-tenth of this quantity. Ironically, both the apex regulators are working
hard on warehouse receipt financing, which can’t be achieved without
construction of modern warehouses and creation of collateral management and
certification companies.
Even more surprising
is that SBP offers financing of up to 65 percent of civil works, but investors
are not keen in availing this facility. It may be said that the entrepreneurs
either fail to understand the whole concept or are scared to initiate such a
venture, where dealing with feudal lords is considered highly risky.
