ISLAMABAD
In a major development, Pakistan’s leading bank, Hank Bank Limited (HBL) has disbursed first-ever loans based on crop (wheat) as collateral to two farmers in Muridke and Sheikhupura district.
An official source at the ministry of national food security said the initiative could act as a catalyst to boost agriculture productivity in the country provided the government makes it binding on the other commercial banks to adopt the scheme at least for ten per cent of their loan portfolio.
It is important to mention that the pilot for an eco-system based on the collateral management regulations 2017 was initially promoted by the Securities and Exchange Commission of Pakistan (SECP).
The State Bank of Pakistan is also developing a similar framework as major growers’ complaint was that they were not provided loans and insurance based on crops.
According to details, loans worth Rs 3.7 million against 185 tons of wheat were disbursed to two farmers whose wheat was placed in a warehouse operated by Agility Pakistan after testing by SGS Pakistan. The stocks are under pledge to HBL at Pakistan Mercantile Exchange. M.M. Flour Mills Chairman Mahmood Moulvi has committed to purchase the stock.
The crop collateral loan was made possible after an effort put together by a non-profit Pakistan Agricultural Coalition (PAC), established by 20 of Pakistan’s leading business groups for the transformation of the agriculture sector. PAC’s objective is to promote private sector in the agriculture sector to lead, adopt technology and promote entrepreneurship to become globally competitive.
On the launch of crop collateral scheme, PAC Chief Executive Arif Nadeem said it is the birth of a new era for Pakistan’s farmers as the warehouse receipts and business model has now been adapted to the local environment.
For a major grains producer like Pakistan, this system will improve financial inclusion of farmers, grower’s market access, protection of crop quality, price stability, and ultimately export competitiveness and food security.
PAC’s sponsors have a cumulative turnover of over $ 10 billion and have superior technical and business expertise in agriculture-related sectors.
It has a unique convening power as well as the ability to provide intellectual leadership to lead the envisaged transformation. PAC has forged strong partnerships with leading farmer organisations such as Farmers Associates Pakistan, Sindh Abadgar Board and Sindh Chamber of Agriculture.
