ECC raises concerns over exclusion of small farmers from risk coverage scheme

• Farmers under the scheme can access loans of up to Rs3 million with a 12-month repayment period

The Economic Coordination Committee (ECC) has raised concerns over the exclusion of small farmers from Punjab and Sindh in a proposed Risk Coverage Scheme aimed at underserved areas. 

According to media reports, the ECC, during a recent meeting, directed the State Bank of Pakistan (SBP) to revisit the eligibility criteria, which currently restrict participation to Khyber Pakhtunkhwa (K-P) and Balochistan, and to present a detailed briefing on the matter in the next session.

The scheme is estimated to have a total budget requirement of Rs37.5 billion over FY27 to FY31, which includes Rs30 billion for risk coverage and Rs7.5 billion for operational costs related to acquiring new borrowers. 

However, the exclusion of small farmers in Punjab and Sindh has raised concerns among ECC members, who highlighted the potential misuse of the scheme by large landowners. They called for equitable access across all provinces.

The SBP explained that the scheme, developed in consultation with the Pakistan Banks Association (PBA), is designed for a three-year period, with the goal of developing an ecosystem that would allow banks to finance small farmers in the future. The initiative aims to support production loans for the crop, dairy, livestock, and fisheries sectors in remote and underserved areas.

Farmers under the scheme can access loans of up to Rs3 million with a 12-month repayment period, extended to 18 months for sugarcane farmers. The scheme is expected to bring 750,000 new borrowers into the formal financial system and generate Rs300 billion in additional credit from FY26 to FY28. The government will provide 10% first-loss coverage on banks’ agricultural loan portfolios for both new and incremental borrowers.

To promote outreach, banks will receive an operational subsidy of Rs10,000 per borrower. The scheme will replace the existing Credit Guarantee Scheme for Small and Marginalised Farmers (CGSMF).

The planned allocations for the scheme are Rs8.725 billion for FY27, Rs12.45 billion for FY28, Rs12.5 billion for FY29 (entirely for risk coverage), and Rs3.775 billion for FY30. While the ECC approved the scheme in principle, it instructed the Finance Division and SBP to reassess the exclusion of Punjab and Sindh and provide a detailed clarification in the upcoming meeting.