Safeguarding Agriculture production through access to finance and insurance

DAWN Pakistan Food & Agri Expo Conference 2016

PRESENTATION BY:

Mr. Noor AhmedState Bank of Pakistan

Presentation Outline

SBP’s Three Pronged Approach towards Financial Inclusion

Proportionate Prudential Regulations to address Sector Specific Risk in Microfinance, SMEs, Consumer Finance, Agri, Islamic Banking etc

Challenge grants for innovations in Agri finance

Branchless Banking 1st A2F Survey

Public Private Partnerships -Risk sharing and Insurance Facilities

Smart subsidies for Capacity Building of providers

International partnerships with FAO & APRACA in Agri. financing

NFIS and focus on client capacity

Perceptive and Innovative Regulations

Development of Market info and Infrastructure

Capacity Building of providers and client

Financial Inclusion: SBP’s Strategic goal

Pakistan’s global recognition in Financial Inclusion

Pakistan’s Financial Inclusion efforts are being globally acknowledged

Pakistan’s MF Regulations and Business Environment rated amongst the best in the world (EIU report)

Pakistan ranked 5th in the world in promoting Financial Inclusion

CGAP acknowledged Pakistan’ Public Private Partnership for leading digital financially inclusive system

SBP amongst the founding members of AFI

State of Financial Inclusion in Pakistan

Level of Access– 42 million bank accounts– 28.1 million plastic cards issued– 15.2 million mobile financial

services accounts

Financial Inclusion - ProgressPercentage of Adult population that has:

2015 2008

A. Bank Accounts 16% 11%B. Other formal 7% 1%Formally Served (A+B) 23% 12%C. Informally Served 24% 32%Financially Served (A+B+C) 47% 44%Financially Excluded 53% 56%

Women availing banking services from 4% (2008) to 11% (2015).

Access Points − 11,469 Bank Branches− 44,383 POS devices− 10,100 ATMs− 301,823 BB Agents

Progress on Financial Inclusion Indicators

Sector Indicator Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Dec-15

Indicator of Access to Credit

SME FinanceOutstanding SME Finance (Rs. in Bn) 271 258 234 253 261 305

No. of SME Borrowers 157,658 149,421 144,141 134,521 152,495 158,387

Microfinance

Gross Loan Portfolio (Rs. in Bn) 28 34 47 61 81 90.79

No. of borrowers (No. in Mn) 2.030 2.232 2.635 3.144 3.507 3.630

Agricultural Finance

Agricultural credit disbursement (Rs. in Bn)

263 294 336 391 516 247 (half year)

No. of Agri borrowers (No .in Mn)

1.445 1.960 1.990 2.151 2.185 2.27

Housing Finance

Outstanding Housing Finance (Rs. in Bn) 62 57 52 53 56 61

No. of borrowers 95,553 87,059 79,478 74,894 70,080 70,498

Financing to agri. sector accelerated in last Seven years

(Rs. In Billion)

7

0

200

400

600

800 TargetDisbursement

Performance of Agriculture FinancingMore than half of the agri-financing

requirement is being met through formal channels

More farmers are being tapped each yearIndustry NPLs are decreasing

Changing Market Structure of Agri. Financing

Intervention for growth in Agri. financing

Shift from mandatory target regime to market based indicative targets

Enabling Regulatory environment for Agri. financing- Supportive PR. Inclusion of new banks including Islamic & Microfinance Banks Pilot Projects to focus underserved agri. intensive districts One Window Operations Risk Mitigation Tools like Crop & Livestock Insurance, Credit

guarantees Introduction of innovative models through FICF Capacity Building & Awareness for banks & farmers

De-risking Agriculture financing

Crop Loan Insurance Scheme Livestock Loan Insurance Scheme Contact Farmer Financing Agreements Credit Guarantee Scheme for small farmers

To mitigate the risk of losses due to natural calamity and encourage banks to finance agriculture and livestock sector, SBP with support of Government launched following de-risking tools for farming community specially for small farmers;

Objective: To share risk of farmers against natural calamities

Premium: Up to 2% per crop per season reimbursed to banks

Coverage: Five Major crops - wheat, rice, maize, cotton & sugarcane. Province wise small farmer’s classification and eligibility of farmers for CLIS in terms of landholding is as follows:

Crop Loan Insurance Scheme

Objective: To encourage banks to lend to small livestock farmers

Coverage: Premium up to 4% reimbursed to banks against financing of livestock (Rs. 300 million was allocated for the FY 2014-15 against 100,000 beneficiaries)

Risk covered: Death of animals due to disease, flood, heavy rains, storm or accident

Livestock Insurance Scheme for Small Borrowers

Period No of

borrowers

Amount Insured

Premium Claimed

July-Dec 2014

17,351 3,062 68

Jan-June 2015

54,976 10,352 224

Total 72,327 13,372 293

Credit Guarantee Scheme for Small & Marginalized Farmers

Objective: To encourage Banks/MFBs to provide collateral-free financing to small farmers through credit guarantee on risk sharing basis

Potential Borrowers: 400,000-500,000 farmers to benefit from this scheme. Up to 5 acres of land in canal-fed and 10 acres in rain-fed areas

Loan Size: Maximum up to Rs. 100,000/- per borrower for production (crop) loans only

Amount in Millions

Way Forward

14

Thanks!