Insurance, lack of warehouses key constraints to farm lending: SBP

Business Recorder reported that State Bank of Pakistan Deputy Governor Salimullah has pointed to three main obstacles to lending in farming: weak insurance cover, a shortage of approved storage facilities and tight access to credit. He made the remarks during a session at the Pakistan Agricultural Coalition's Agri-Connections Conference and Expo, which was held recently. In his view, agriculture is the economy's most vital sector yet still struggles with several structural barriers to finance.

On insurance, Salimullah said farmers face a high overall level of risk, and the lack of adequate cover makes banks hesitant to extend loans to them. The second hurdle, he noted, is that accredited warehouses are scarce, while the informal nature of the farm produce chain leaves lenders unsure whether they can control the goods offered as security. Access to finance was the third constraint, and the central bank is trying to create a setting where lending to farms can become a commercially sound venture.

Other sessions covered livestock investment, dairy and farm machinery. Pakistan Dairy Association chairman Usman Zaheer Ahmed put annual milk output at about 72 billion litres, which places the country fourth worldwide. He estimated that bringing half of the unregistered dairy trade into the formal system, along with a minimum five per cent levy, could bring about Rs250 billion a year to the exchequer.