This is the story of two subsidies. The first is from two years ago, announced in a panic and in response to the most colossal agricultural crisis this country has seen in decades. The latter, only announced a few months ago and still underway, is tailored to a more specific purpose.
Both were introduced by governments of the same political party, the PML-N, although one was a federal subsidy package and the other was from the provincial government in Punjab.
The first was the Kissan Package introduced in November 2022 in response to the destruction from the devastating floods that year. The second package came around two years after in November 2024, aimed at providing cheap loans and financing for livestock farming.
The two subsidies were introduced in very different circumstances. They also represent two very different attitudes towards government aid for agriculture. The Punjab CM’s Livestock Card is essentially the allocation of a Rs 20 billion fund meant to provide interest free loans to livestock farmers. The scheme ticks a lot of boxes. The government has initiated the scheme in partnership with the Bank of Punjab, which will help with the disbursements, management, and loan collections. It is not a handout, so even though there will be losses, it is an attempt by the government to invest in farmers rather than make a splash and try to get some publicity out of it. Perhaps most importantly, it is sending financing into a sector that has largely been ignored by the government and private sector corporate banks. So how does it work?
Subsidies of the past
Let us get this straight. It takes a lot for this publication to give a nod of approval to anything the government does. Our natural position on anything coming from government quarters is suspicion. So when some new program or scheme comes out, the assumption is it will become a victim either to incompetence (at best) or malice and corruption (at worst).
Just look at the last major agriculture subsidy scheme Pakistan saw. In 2022, Prime Minister Shehbaz Sharif, then in his first tenure, announced a Rs1,800 billion subsidy package for farmers affected by this year’s catastrophic flooding. It was a splashy announcement that promised among other things loans, sufficient availability of fertilisers, cheap financing for tractors, and a reduction in electricity tariff to a fixed rate.
It was a pressing matter to introduce some relief to the farming community. In an economy majorly reliant on agriculture, climate change and its effects have been a major blow to rural economies. With international agencies estimating losses over the $40 billion mark, there was a dire need for agricultural reforms
Under the package, the government will give Rs10.6 billion loans to small farmers across the country while small farmers of flood-hit areas would get loans worth Rs 80 billion. In addition to the interest-free and subsidised loans, subsidies will also be given on farm imports such as fertilisers, electricity, seeds, and even tractors.
Given the circumstances, it was a fair enough deal. If it had been implemented strategically, the Kissan Package could have had a wide-reaching impact in helping farmers affected by the floods. But this was very much a stop-gap solution. The scale of the problems faced by our agricultural sector cannot be fixed by solutions of this nature, even if they are well-intentioned.
At most, any subsidy will provide temporary relief. For too long the state has allowed the country’s agriculture to suffer and have offered only stop-gap solutions such as subsidy packaged. We have been papering over the cracks for so long that our entire agrarian economy has grown dependent on subsidy packages.
The problems that need to be addressed
So what is the reason? How did Pakistan, a country with vast swathes of rich agricultural land, find itself in a position where its agricultural sector has been on the decline for decades? There are two facets to the problem, The first is that for decades Pakistan has been falling behind on agricultural competitiveness. While the rest of the world has developed through research, mechanization, and technological advancements we have lagged behind. On top of that now our farmers are facing the harsh and unpredictable realities of climate change.
One of the things we need most in such an environment is agricultural financing, which is a subject that has been ignored by Pakistan’s commercial banks for a very long time, and only recently has started getting some attention. With climate change pressing and a lack of financing, Pakistan’s agriculture has fallen behind.
You don’t have to look too far back to find how underserved the agricultural sector is by Pakistan’s banks. In 2022 for example, according to a PWC study, allocation of loans to priority segments, namely Small and Medium Enterprises (SME) and Agriculture, was relatively low. In total, these kinds of loans accounted for less than 8% of the total loans.
Specifically, SME loans constitute 4.2% of the portfolio, while Agriculture loans accounted for 3.6%. This means that despite making up 23% of the annual output, financing extended to agriculture makes up less than three percent of the total asset base of banks in the country. It is ridiculous when you think about it. Agriculture provides a living to nearly two-thirds of the population, contributing to approximately three-fourths of the country’s export earnings. It accounts for 23% of the GDP and employs 37.4 percent%.
The livestock card
But over time this trend has been changing, and the banking industry seems to be realising the importance of focusing on this massive yet largely unbanked sector of the economy. In 2023, for example, the agriculture sector saw a 27.5% growth in agri loans, after the agriculture lending financial institutions disbursed Rs 1.22 trillion on account of agricultural financing during the first nine months (July-March) of this fiscal year.
This is exactly what the government in Punjab is ensuring with its livestock card. The Livestock Card is an interest-free loan program worth Rs 11 billion for livestock farmers. “The scheme will benefit 80,000 livestock farmers, preparing 400,000 animals for the fattening program, which will not only fulfil local meat demands but also support exports,” explains Provincial Minister for Livestock and Agriculture Syed Ashiq Hussain Kirmani.
The Provincial Minister further elaborated that interest-free loans will be provided for four months in equal installments, with each animal eligible for a loan of Rs 27,000. Farmers can access loans ranging from Rs 135,000 to Rs 270,000.
It is a pretty simple partnership. The BoP gets to increase their agriculture portfolio, something the State Bank of Pakistan has been trying to get commercial banks to do, and the government funds the loans to these farmers. The card has been active since the 15th of December, and the response has been good.
Essentially, you have a system in which the government is providing funds for livestock farmers to grow and improve their herds. The goal is to get livestock cards to at least 40,000 farmers, and the loan amounts will likely be enough to cover around 4 lakh cattle, which are the intended kind of livestock for the scheme.
With the Bank of Punjab on board, the process for farmers to get these interest-free loans is pretty easy as well. Applicant’s mobile phone should be SIM active and registered in his/her name, applicant should own at least five to ten (cows/calves), and applicants having more than ten calves will also be eligible for loan. However, they will be given a loan facility only for ten animals. Cattle breeders who wish to take loans text their identity card number Sent to 8070. The applicant must have a clean credit history (no default) verified by the Electronic Credit Information Bureau. Applicant’s identity and character will also be verified by NADRA and NACTA agencies.
To avail it, all a farmer has to do is apply online on the Punjab Information Technology Board application. The total tenure of the loan will be maximum 150 days (five months), and using the loan tenure will be 120 days (four months).The next 30 days (one month) will be the period for full repayment of the loan. Cattle keepers will be provided interest free loan through Chief Minister Punjab Livestock Card. The amount of interest or profit will be borne by the Government of Punjab.
Why it could work
Now here’s the rub. The scheme sounds great and has a solid model. The main issue is going to be disbursement. For now, it seems to be going pretty smoothly. At a recent event in Pakpattan, for example, livestock farmers showed interest in loans for rearing and fattening their cattle. Nearly 1600 farmers applied for the scheme, and 578 cards have been received.
Clearly there is an interest in this scheme. The question is, can the government and the BoP band together to provide the services they have promised? The government is claiming it will do a lot, including providing tagging, vaccination, and insemination services for these animals. Farmers rearing healthy animals will be linked to major exporters in Punjab.
All of this needs to be taken with a grain of salt. The government regularly over promises and focuses on the wrong things. In this case, all they need to do is make sure the funds are available, there are no technical glitches with farmers signing up for the card, the loans are given by the bank to each farmer for the amount of time they need it for, and that the appetite for pulling this off does not disappear.
Providing financing for sectors such as livestock farming is incredibly important. It has even been a recent mission of the SBP to promote this segment of the banking sector, and there is a great chance for provincial banks in particular to jump on such schemes along with their respective governments.
“Formal credit outreach in rural areas is limited, leading many farmers to rely on informal sources like moneylenders, which often charge high-interest rates. To address this gap, there is a growing need to improve access to finance for farmers through digital solutions,” said Syed Irfan Ali, executive director of the SBP’s financial inclusion group, in an earlier comment for Profit.
“Digital platforms, mobile banking, and fintech services can simplify loan processes, reduce costs, and ensure timely credit delivery. These innovations can empower farmers with better financial options and support agricultural growth.”
In Pakistan, more than 90% of farmers hold less than 12 acres of land. And above this as well, the stratification of the biggest land owners compared to small landowners is mind boggling. This is especially worse when you consider these smaller landholders need more tailored products since they cannot buy products and machinery is massive quantities. And this is landed farmers who are still regularly in the spotlight. Small scale livestock farmers are rarely talked about.
For these segments, such schemes can be life changing and inject the sector with some vitality. It is not impossible to pull off. For starters, the financial landscape in rural areas has transformed significantly, with the surge in 3G and 4G connectivity and the widespread use of mobile wallets. A large portion of the rural population can now be considered “banked,” though efforts are needed to convert mobile wallets into accessible banking accounts and, eventually, financing tools. A strong case has also emerged to scale agricultural financing in Pakistan by leveraging public datasets and digital infrastructure. The question is whether or not financial institutions can look at agricultural financing as a profitable opportunity rather than just part of a regulatory checklist that the SBP wants them to fulfill.
This means as long as the tech works and farmers can be connected to financing, it will bolster livestock farming in Punjab. More importantly, with the big caveat of the government staying the course, this is the kind of government intervention that is a win-win for all stakeholders involved.
