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QUAID-I-AZAM UNIVERSITY ISLAMABAD

Quaid-i-Azam School of Management Sciences

RESEARCH PAPER: Micro Financing Role In Improving Agriculture Sector`s Performance In Sindh

Submitted by: Muhammad Shoaib Bozdar Student Roll #: 01171211026 Submitted to: Course: Class: Shazia Perveen

Research Methods and Report Writing MPA-II 14-12-2012

Date Submitted:

2 TABLE OF CONTENTS Abstract ___________________________________________________________________ 3 Acknowledgment ___________________________________________________________ 4 Chapter # 01 _________________________________________________________________ 5 Introduction ________________________________________________________________ 5 Aim ______________________________________________________________________ 7 Objectives: _________________________________________________________________ 7 Chapter # 02 _________________________________________________________________ 8 Literature review: ___________________________________________________________ 8 Crop Projections in Pakistan __________________________________________________ 15 Punjab__________________________________________________________________15 Sindh ________________________________________________________________ 16 NWFP _________________________________________________________________ 17 Baluchistan _____________________________________________________________ 18 Hypothesis: _______________________________________________________________ 21 Chapter # 03 ________________________________________________________________ 22 Methodology ______________________________________________________________ 22 Chapter # 04 ________________________________________________________________ 23 DATA ANALYSIS: ________________________________________________________ 23 Chapter # 05 ________________________________________________________________ 25 Conclusion________________________________________________________________ 25 Recommendation: __________________________________________________________ 25 Reference: ________________________________________________________________ 27

3 Abstract Agriculture sector claims for foods are permitted in an increasing number of countries, but there are very few studies evaluating their effects on the upcoming decreasing rate of agriculture yield. Agriculture yield is rising by the support of institutional and non institutional credit to farmer in their field. As good nutrition is critical for good health it is responsibility of the institution to solve this issue as a social obligation. The study was conducted to find out the fact that is really affecting the product of agriculture and also improving this sector. Credit plays a vital role in development. It helps farmers to take on new investments and adopt new technologies to increase agricultural yield. Limited access of the rural poor to formal credit has negative implications for rural growth and welfare. Formal loans are normally used for production and investment purposes while informal loans are valueless away on consumption. The aim of the study is to explore extent of various specific factors that improving agriculture yield. This research is conducted through secondary source data with help of qualitative method through that different books, article, journal, website, internet source are visited and study for this research. From secondary sources of data about the research problem it is obvious that informal credit is dominating the formal credit by securing market share of 70%, because we have found that formal credit institutions and government authorities are not performing effectively & efficiently in the market.

4 Acknowledgment I am heartily thankful to my Research instructor, Ma`m Shazia Ijaz, whose encouragement, guidance and support from initial to the final level enabled me to accomplish this research. With her dedicated lectures I was able to practically understand and apply what I have learned in these classes My grateful thanks also go to my beloved parents whose prayers supported me in completion of this research paper. My efforts would have been nothing without the enthusiasm and imagination depth provided to me by my honourable teacher. Besides, this research study made me to realize the value of research and a new experience in writing research paper challenged my intuition level every minute, great appreciation for my seniors and friends who supported me from time to time during writing of research paper. Writing this research paper was really great and exciting experience.

5 Chapter # 01 Introduction Potential formal suppliers of credit are often hesitant to advance loans to the small farmers because of high transaction costs and perceived high risk. Formal institutions are biased in favor of big farmers. Their political influence facilitates their access to formal credit and thus lending by the formal institutions becomes skewed towards the rich. Credit plays a vital role in development. It helps farmers to take on new investments and adopt new technologies to increase agricultural yield. Limited access of the rural poor to formal credit has negative implications for rural growth and welfare. Formal loans are normally used for production and investment purposes while informal loans are valueless away on consumption. Non-availability of credit from formal lending institutions compels small farmers and tenants to resort to informal lenders. Informal sources of agricultural credit include friends and relatives, commission agents, shopkeepers, landlords, employers and inputs suppliers. Formal lenders are unjust towards landlords who can meet the collateral conditions of the lending institutions and as a result the smaller and tenant farmers are left out of the whole scheme of poverty reduction. The effective rate of interest on informal credits is exorbitantly high. It is a general practice that the small growers obtain loan in the form of cash or inputs like seed, fertilizers and pesticides. These are tied loans in the sense that farmers obtaining them have to deliver their produce to these commission agents who price their produce much lower than the market price.

6 This further suggests that the cost of urea credit purchase is 76 percent and that of DAP credit purchase is 68 percent. In case of weedicides and pesticides cost of credit purchase is about 83 percent. It is evident that cost of informal loans is very high as against interest rate charged by the formal lending institutions. High interest rates on informal agricultural loans adversely affect the small farmers and tenants. These often generate a vicious circle of unending poverty and sadness for them. The schemes of formal credit should contain the attractive features like collateral free lending, proximity, flexibility in loan transactions and timely delivery. The institutions available to deal with the credit needs of the rural poor have limited outreach; professional and management capacity. There is a general lack of information, communication and spreading of information about the availability of micro credit. So it is needed that information regarding these credit institutions is widely spread among the rural population. Collateral requirements need to be further relaxed to extend the outreach of formal lending institutions. Promoting use of alternative forms of collateral and more flexible loan repayment may be good policy prescriptions in this regard.

7 Aim The aim of the study is to explore extent of various specific factors that improving agriculture yield either through credit financing either institutional or non institutional. Objectives: To examine the assumption behind the micro financing in boosting agriculture sector`s To identify the opinion of farmer in process of growing product with the help of agriculture or microfinance To examine the positive and negative influence of micro financing in agriculture sector`s To explore the extent of various specific factors affecting on the agriculture sector`s of Pakistan

8 Chapter # 02 Literature review: Agriculture constitutes the largest sector of our economy. Majority of the population is directly or indirectly, dependent on this sector. It contributes about 24 percent of Gross Domestic Product (GDP) and accounts for half of employed labor force and is the largest source of foreign exchange earnings. It feeds whole rural and urban population. Realizing its importance, planners and policy makers are always keen to have reliable area and production statistics of agricultural crops well in time. In Pakistan, there are two major sources of agricultural credit, formal (institutional) and Informal (non-institutional) source. The institutional sources include Zari Tarkiati Bank Limited, commercial banks and domestic private banks while the non-institutional credit suppliers include friends, neighbors, and professional money lenders are the main source of credit in the country (Idress and Ibrahim, 1993). Pakistan government makes policy to guarantee the accessibility of loan to the farmer for achieving desire full product. Loan is necessary of farming community increasing over a period. Therefore, government has improved agriculture loan distribution for farmer. Loan that provided through institute such as Commercial Bank, Zari Taaraqi Bank and Domestic Bank.Mostley agriculture sector depend on loan and other sector of economy because of variation in season. Credit may provide them opportunity to earn more money and improve their standard of living (Abedullah, Naushad khan, Malik Muhammad Shafi, Naeem Shah, 2009). The funds for lending are provided by the state Bank of Pakistan at 2% below the bank rate. The credit increase the agriculture productivity while some productivity goes directly to consumers and the remaining stuff go to agro-based industries for manufacturing of other items. The industries generate the employment and solve the problem of unemployment of the country. The productivity of agriculture and agri-business control both food and general

9 inflation. They improve the income level and purchasing power of the people. Without

food, survival of life on the earth is impossible. The agriculture failure is the failure of the world, so agriculture plays a back bone role in economic development of Pakistan. Ansari (2001) reported that crop productivity could be increased through the introduction and promotion of innovative agricultural technology. Farmers are looking towards financial sources for taking loans on easy terms so as to increase their agricultural productivity. Hassan (2001) examined the role of Aga Khan Rural Support Programme (AKRSP) in the development of agriculture. The study emphasize on those development activities crop yield. The study revealed that the introduction of agricultural technologies made a significant effect on the production of various crops and the major increase was noted in the production of cash crops. Shahid (2002) examined The impact of micro credit intervention for enterprises development by National Rural Support Program (NRSP) in District Sialkot presented that respondent showed satisfaction about micro-credit scheme stated by NRSP. He also reported that this scheme has a positive impact on monthly income of the sampled respondents which in turn had improved their living standard. He recommended the size of the loan should increase for further enhancement of their income. He also suggested that other parts of the province, so that other people could benefit from such types of scheme. Waqar,(2002) reported that due to proper utilization of credit, the monthly income and monthly savings of all the respondents have been increased. As a whole 73percent of increase was observed, in monthly income of the respondents. Employment opportunities have also shown an upward trend in the target area. The credit program has also brought a positive effect in the living standard of the beneficiaries of micro-credits. Land the high inequality in the existing land tenure structure calls for a comprehensive approach that is socioeconomic and politically feasible.

10 On the one hand, it requires better land markets functions through: 1. Improvements in the land administration system, including computerization of land records and reduction of transaction costs. 2. Land taxation policies to reduce incentives for tentative purposes. 3. Market-based land purchase schemes to facilitate land access across size groups. The latest agriculture loan figures released by the State Bank of Pakistan only confirm the worst fears of farmers the banks do not take agriculture loans serious enough to meet their targets. The last year was an exception when the banks exceeded their target by Rs12

billion and the State Bank of Pakistan increased indicative credit target to Rs250 billion for this year Rs38 billion(18percent) higher than the actual disbursement of Rs212 billion. (www.sappk.wordpress.com, 2009.06.02, agricultural-credit-behind-target) According to the 10-month figures, commercial banks have disbursed only Rs174.77 billion or 69 per cent of Rs250 billion targets. If the target has to be met, more than Rs75 billion needs to be disbursed in the remaining two months (May-June) at a rate of Rs37 billion each month against their monthly average of Rs17.47 billion achieved so far.(

http://sappk.wordpress.com, 2009.06.02 ,agricultural-credit-behind-target) Disbursements by five major banks Allied Bank, Habib Bank, MCB, National Bank of Pakistan and United Bank stood at Rs86.552 billion, compared to Rs74.328 billion during the same period of last few years, up by 16.45 per cent. Fourteen private (small) banks jointly advanced Rs32.1 billion, compared to Rs33.48 billion disbursed in July-April, 2008 a drop of 4.26 percent. The Zarai Tarqiati Bank (ZTBL) the largest specialized bank advanced Rs52.505 billion against Rs45.8 billion and the Punjab Provincial Co-operative Bank Rs3.610 billion, compared to Rs3.983 billion last year. (News Urdu Express Lahore, Agricultural

credit behind target, 2009, july02,Ahmad Fraz Khan)

11 According to report during FY -2008-2009: Sindh produces extra commodities by following ratios; 1. 2. 3. Wheat Cotton Rice by by by 13.46% 17.43% 37.58

100 0

13.46% 17.43%

17.43%

Wheat

Cotton

Rice

Source: http://sappk.wordpress.com/2009/06/02/agricultural-credit-behind-target/

Hence, from this data it is quite clear that Sindh still has capacity to produce more wheat, cotton and rice because capacity of Sindh is unsaturated and she possess potential to produce further more stuff to meet the needs of Pakistan and world at large. While Sugarcane production reduced in Sindh and growers beard losses last year by Rs.5 billions. Some reasons are given below for its reduction in production namely; 1. 2. Loss of Rs.5 billions to growers. Sugar mill owners do not pay Rs.1.2 billions to growers.

12 3. 4. Misconduct of Mill owners with growers. Sugar Mill owners do not pay Rs.10336500000 to growers as quality premium.

According to federal Government of Pakistans plans, that there would not be new tax on agriculture sector but they are thinking to bring related inputs, technology and machinery into tax regime, hence peoples from different areas agriculture field opposing federal government plans in this respect. It is basic principle of strategic management, that whenever you formulate strategy, you should take on board all of concerned stakeholders before its implementation, but unfortunately we have not seen such practices in our country since 62 years of her history. There are two representative organizations of Sindh sent proposal for reforms in agriculture and for Central Bank Credit policy. 1. 2. Sindh Abadgar Board Auwan-e-Zarat, Sindh

In every budget federal government announce Agri-credit for growers, but these funds do not reach to growers at all. Sindh produces 25% of national Agriculture production but receives only 10% credit funds, federal government should pay at least 25% of announced funds for Sindh Agri reforms. There are six specialized financial institutes and fourteen small banks involved in Agri-credit it includes: ZTBL Pakistan MCB Pakistan HBL Pakistan ABL Pakistan NBP Pakistan

13 UBL Pakistan In our country formal credit institutions meet only 30% of growers needs and rest of needs met by informal credit instruments, formal credit market meet only 30% needs while remaining 70% by informal credit market in Pakistan. From Above financial institutions ZTBL is one of the major public sector Agri lenders which are present at gross root level in country. Table No: 1 Target funds required to boost economy of Pakistan S. No 1. 2. 3. 4. 5. 6. 7. Agri Input or Tool Fertilizer Diesel Tractors Seeds Electricity Pesticides Other implements Total Amount in billion 250 250 30 50 40 28 50 698

14

300 250 200 150 100 50 0

250

250

30

50

40

28

50

Tr ac to rs

liz er

se l

ee ds

Series1

Source: 09)

(http://www.pbs.gov.pk/content/crops-area-and-production-districts-1981-82-2008-

This table shows that how much funds are required to boost national economy of Pakistan as we know that only agriculture is sector which is not affected by global financial crisis, only tractor industry from automobiles and agriculture related industries are secure from financial tsunami. Pakistan Rs.698 billion to satisfy growers needs and wants in country these projections are published by different agriculture experts and economist in Pakistan, this would be a major move by which Pakistan can strengthen their economy in real terms at global level.

es t ic O th id er es im pl em en ts

D ie

Fe r ti

le ct ri

ci

ty

15 Crop Projections in Pakistan Punjab Acreage Projections: The 1st and 2nd Estimates of area sown under 12 major crops are arrived at through Sample Surveys undertaken by the Directorate of Crop Reporting Service, Punjab. The final estimates of area sown under all crops are based on complete enumeration (Girdwari) of all Mouzas carried out by Patwaris of Revenue Department twice a year. The information gathered by Patwari is passed on by the Revenue Department to the Provincial Bureau of Statistics for preparation of computerized Jinswar statements. The acreage statistics included in the 1st and 2nd estimates are approved by the Secretary, Agriculture Department at his level. The final acreage estimates based on the Girdwari are approved by the Provincial Agriculture Statistics Coordination Board headed by the Chairman, Planning Board, and Punjab. Production projections: Preliminary production estimates of 12 major crops are based on opinion survey undertaken by the Crop Reporting Service of Agriculture Department. These estimates are approved by Secretary, Agriculture Department. For final yield estimates, crop cutting surveys are conducted by the Crop Reporting Service for wheat, cotton and rice. Growers Opinion survey is used for other crops. The final estimates of major crops are cleared by the Provincial Agriculture Statistics Coordination Board. (www.pbs.gov.pk/methodology-crop-estimate)

16 Sindh Acreage Projections: In the Sindh, 1st estimate relates to area sown under all crops of area sown. The 2nd estimate which is final in case of area and preliminary in case of production in respect of wheat, cotton and rice is prepared on the basis of Sample Survey undertaken by the Statistical staff of Provincial Agricultural Extension. Final Estimate is the verification of 2nd Estimate. Area sown of wheat, cotton and rice is obtained by applying raising factors to the area surveyed at the district level. Provincial estimates are obtained by summing the district estimates. The area of other crops is obtained from the District Revenue Offices. The consolidated information is examined by a sub-committee comprising representatives of the Provincial Revenue, Agriculture, Irrigation and Bureau of Statistics Departments. Production Projections: In Sindh preliminary estimates of production for all major crops are based on subjective judgment of the Agricultural Extension Staff. For final estimates, cropcutting surveys are conducted for wheat, cotton and rice. Production estimates for remaining major crops are based on subjective judgment of the Provincial Department and opinion survey conducted by Statistical Staff of Agricultural Extension. The final estimates are checked by a Sub-committee comprising of representatives from the Provincial Department of Agriculture, Revenue, Irrigation and Planning & Development. The preliminary estimates are cleared by Secretary, Agriculture Department and final by the Provincial Agriculture Statistics Coordination Board. (www.pbs.gov.pk/content/methodology-crop-estimate)

17 NWFP Acreage Projections: In NWFP the 1st and 2nd Estimates of area sown for all crops are arrived at sample survey method for the selected districts. However for unsettled districts area figures are based on subjective judgment of Crop reporting survey. The final estimates are based on Girdwari undertaken by the Revenue Patwari. These are, however, examined by a Sub-committee comprising of representatives from Revenue, Agriculture, Irrigation and Planning & Development Departments. Production Projections: In NWFP, preliminary yield estimates of crops are arrived at on the basis of growers opinion survey undertaken by the Crop Reporting staff of the Provincial Agriculture Department and later approved by Secretary, Agriculture Department. The final yield estimates of ten (10) crops are based on the results of crop cutting surveys using random sampling technical. The final estimates of remaining crops are compiled on the basis of growers opinion survey conducted by the Crop Reporting Staff of the Provincial Agriculture Department. These final estimates of all crops are then examined by a Sub-Committee comprising of representatives from Provincial Revenue, Irrigation, Agriculture and Planning & Development Departments. These estimates are subsequently approved by the Provincial Agriculture Statistics Coordination Board. (www.pbs.gov.pk/content/methodology-crop-estimate)

18 Baluchistan Acreage Projections: The Agriculture Department collects and compiles the acreage statistics through their Extension staff on the basis of their personal judgment. The final estimates of area sown for all crops are approved by the Agriculture Statistics Coordination Board. Production Projections: In Baluchistan, yield of all crops is fixed on the basis of subjective judgment of Extension staff of Provincial Agriculture Department. (www.pbs.gov.pk/content/methodology-crop-estimate) Current Agri-credit position in Pakistan The latest agriculture loan figures released by the State Bank of Pakistan only confirm the worst fears of farmers the banks do not take agriculture loans serious enough to meet their targets. The last few year was an exception when the banks exceeded their target by Rs12 billion and the State Bank of Pakistan increased indicative credit target to Rs250 billion for this year Rs38 billion (18 per cent) higher than the actual disbursement of Rs212 billion. (http://sappk.wordpress.com/2009/06/02/agricultural-credit-behind-target/) According to the 10-month figures, commercial banks have disbursed only Rs174.77 billion or 69 per cent of Rs250 billion targets. If the target has to be met, more than Rs75 billion needs to be disbursed in the remaining two months (May-June) at a rate of Rs37 billion each month against their monthly average of Rs17.47 billion achieved so far. Disbursements by five major banks Allied Bank, Habib Bank, MCB, National Bank of Pakistan and United Bank stood at Rs86.552 billion, compared to Rs74.328 billion during the same period of last year, up by 16.45 per cent. Fourteen private (small) banks jointly

19 advanced Rs32.1 billion, compared to Rs33.48 billion disbursed in July-April,2008a drop of 4.26% The Zarai Tarqiati Bank (ZTBL) the largest specialized bank advanced Rs52.505 billion against Rs45.8 billion and the Punjab Provincial Co-operative Bank Rs3.610 billion, compared to Rs3.983 billion last year. Fortunately, agriculture is the only sector, which has maintained some vibrancy in otherwise recession-hit economy. Load shedding has taken better of industrial sector, and service sector has been subdued. On the contrary, the country has just harvested a record wheat crop, which not only reflects current vibrancy of the sector but also its potential to perform miracles. It is unfortunate that the only performing sector is being denied its most essential requirement. The formal sector provides only 30 per cent of its total requirements. Failure to achieve even that 30 per cent could be termed as un-pardonable. The sector needs around Rs250 billion equivalent to the official target for fertilizer alone. It needs another Rs250 billion for diesel, even at the depressed demand of two billion liters. It also needs Rs30 for tractors, which could increase if production rises. It spends Rs50 billion on seeds, Rs40 billion on electricity, even with all load shedding going on, Rs28 billion on pesticides and Rs50 billion on other implements. The mere contribution of banking sector could be gauged from the fact that out of all these expenditures on seven major heads, the banks would only be covering on fertilizer if they achieve their credit target. But even that does not seem to be a possibility, this year again. The target would not be achievable given the expenditures pattern of the farmers. During May and June, there would be sowing and nursery raising activity for cotton and rice and sugarcane would be going under routine development.

20 The only activity is part purchase of fertilizer, which might not require huge amounts to provide banks a chance to hit their target even if they wish to. The next big activity would be spraying pesticides on cotton during the monsoon (September). Thus, the target would be missed by all means. The government is denying credit to the agriculture sector when it has just agreed to share Rs31 billion out of total dues of Rs84 billion that the Karachi Electricity Supply Company (KESC) a totally private concern owes to Pakistan Electric Power Company (Pepco). (sappk.wordpress.com/2009/.../agricultural-credit-behind-target) On the one hand, the government has money to throw around lavishly on privatized concerns like the KESC and on the other; it does not have money to even lend to the agriculture sector. This is a dangerous dichotomy, to say the least. (sappk.wordpress.com) Loans to agriculture sector are, by and large, commercial loans, coming on the market rate as they go to other sectors and high mark up rates if industrial loans are benchmarks. The federal government has recently helped Pakistan Electric Power Company (Pepco) to raise Rs81 billion from banks through term deposit certificate for clearing its circular debts. The banks were literally forced to come up with required money. It is not to belittle importance of the power sector or argue that it was not important to help Pepco raise money. But, it is to underline importance of the agriculture sector and need for official help to meet its fiscal requirements. (sappk.wordpress.com/2009) Pakistans economy, in its present form, revolves around agriculture. Even its manufacturing sector is currently totally dependent on agriculture tractor manufacturing is the only sector which escaped global and local recession, in otherwise total stagnant automobile sector. The tractor industry also runs some 300 downstream SMEs. It only goes to show how important the sector has become in current economic scenario. If the government cannot

21 make the banks partly finance the most important sector of the economy, there must be something severely lacking in its priorities and strategies of governance. (sappk.wordpress.com/2009/.../agricultural-credit-behind-target) Hypothesis: Credit finance increase the agriculture yield Micro financing credits have direct relation with agriculture yield in some extent Interest rates are higher in informal credit market, then to formal credit market in Pakistan Performance of formal credit is extremely poor; hence they are not penetrating fully in every corner of Pakistan Purchasing power of growers is declined due to higher interest rates in Pakistan

22 Chapter # 03 Methodology The present study about focusing on role of micro finance in improving agriculture yield, tries to deal with some facts. The approach adopted here is quite analytical by the involvement of interpretation and perceptional elements. Students studying at master level study at Quaid-I-Azam university Islamabad, belonging to various provinces is quite rational explanation of the phenomenon that have touched almost every ones life. Quantitative components and narrative section is highly enlightened about the financial administration. Students perception, teachers ideas, survey, questionnaire and published articles are quite approached it also helps the cost of institutional imbalance and absence of genuine agriculture is under discussion. Qualitative methods work to enforce the narrative helps to guide, interpretation & explanation of the events in the study. Researcher mainly prefer the secondary source of data used qualitative method through that researcher review different books , article journal on agriculture sector as well on microfinance and their role in boosting agriculture yield, also researcher access the internet, search engine, net, Google, website etc.

23 Chapter # 04 DATA ANALYSIS: Formal credit institutions meet only 30% of growers needs and rest of needs met by informal credit instruments, formal credit market meet only 30% needs while remaining 70% by informal credit market in Pakistan. Chart: show the % of formal credit and informal credit of grower needs

30%

70%

Fig: 30%formal credit institutional and 70% non institutional credit meet to grower`s need

24 Cash and Credit Ratios for purchasing inputs in the Area Hence it is quite clear that vast majority of growers acquire inputs for crops on credit, while formal credit market only cover limited area of credit and rest cover by informal credit market and middlemen. In the area 23% growers purchase inputs by cash and rest of on credit

Credit & Cash Ratios

On Cash 23%

On Credit 77%

Above pie chart show that landlord people are 23% out of 100% ,they purchase agriculture commodities mostly on cash, some time on credit but majority of remaining people are simple farmer they acquire loan on credit from formal or informal credit channel and some time their product totally consume in returning loan to credit lender. Researcher analyses from the literature review is that the credit given to farmer through proper channel mean institute either from banks even it is Zarai Tarqiati Bank (ZTBL) charges more interest than credit get from non institutional. And credit is also helping the farmer in boosting the agriculture yield in global market. While the informal credit s also beneficial for those people who are landlord and have capability to pay loan back with high interest rate but not for simple framer.

25 Chapter # 05 Conclusion From secondary sources of data about the research problem it is obvious that informal credit is dominating the formal credit by securing market share of 70%, because we have found that formal credit institutions and government authorities are not performing effectively & efficiently in the market. Formal credit market found vibrant in rural finance because throughout agro economic history of Pakistan government allocate limited funds for lending which meet only 30% requirements, while rest meet by informal credit sector. State Bank of Pakistan never played their role in sincerely to boost Agrian based economy by massive lending by forming such policy to pressurize all banks and financial institution in country, SBP role is crucial in this regard. Our national economy largely depends upon agriculture but unfortunately that sector is neglected since inception of Pakistan, In current FY 2009-2010 budget government allocated only Rs.18 billion which only 0.62% of national budget, while agriculture pay 23% to GDP. While our neighboring country allocated RS.3.5 trillion in FY 2009-2010 budget. Recommendation: For banks: 1. Simple lending procedures adopted in ZTBL, other Banks. And Disburse ZTBL loans to small growers not big fishes only. 2. All responsible institutions like, ZTBL, ABL, UBL, MCB, HBL, NBP and other 14 small banks should improve their performance in disbursing loans. 3. ZTBL should use expansion strategy by opening new branches at Union council level all over the country.

26 4. Effectiveness & efficiency should bring in banks, because we have seen banks disburse only 69% of allocated Rs.250 billion. For Government: 5. Bribe system should be abolished and Funds allocation for agricultural credit raise to Rs.835 billion from Rs.250 billion. 6. Dont bring agricultural income within tax regime because it is purely provincial subject not related to federal government. 7. Black marketing of fertilizers should be controlled. 8. Middlemen charging higher interest rates so government authorities take actions to stabilize interest rates. 9. Complex loan processing should be abolished. For formal credit lender: 10. NGOs charging low interest rates so those organizations should use expansion and penetration strategy. 11. I found that 76.67% growers acquiring loans from informal credit market, so formal credit institutions has to play their sincerely in this respect.

27 REFERENCE Shahidur R. Khandker. The Impact of Farm Credit in Pakistan Sheikh Mubarak Ali 3rd =revised edition in November, 2004. Economic Problems of Pakistan Abedullah, N.Mahmood, Khalid, 2009. The role of agriculture credit in the growth of livestock sector: A case study of Faisalabad, Pakistan Vet.J. 2009, 29(2):p81-84. Waqar, M. 2002. Effects of SRSPs micro-enterprise development programme on income and employment. Thesis, Agric. Univ. Peshawar, Pakistan Shahid, M. 2002. Impact assessment of micro-credit intervention for enterprise development by National Rural Support Program in District Sialkot. Thesis. IDS, Agric. Univ. Peshawar, Pakistan. Idress, M. and M. Ibrahim. 1993. Agricultural credit role in the development of agriculture. J. Rural Dev.& Administ.25(4): 64-74 Hassan, M. 2001. Role of Agha Khan rural support programme in the diffusion of the agricultural technologies Ansari, F.B. 2001. Agricultural development bank of Pakistan to promote innovative technology. House J. Agro. Bankers ADBP, Islamabad, Pakistan Dawn-Business; March 30, 2008. Punjab Consumes 84% of farm credit. Jabbar, A. 2000. Role of AKRSP in agriculture development in NA-3. M.Sc(Hons) Thesis, Deptt. Of Agric. Econ. Agric.Univ. Peshawar, Pakistan. Maqbool Hussain Sial, Muhammad Waqas July 20, 2010. Role of Institutional Credit on Agricultural Production: A Time Series Analysis of Pakistan Muhammad, W. 2003. An investigation into effectiveness of micro-credit programme of AKRSP

28 Khan, A.R. 1994. Survey report on farm credit recovery of problems in Pakistan and possible Solution. Govt. of Pakistan. 2008-09. Economic survey of Pakistan. Ministry of Finance, Econ. Advisors Wing, Islamabad, Pakistan. Govt. of Pakistan. 2007-08. Economic survey of Pakistan. Ministry of Finance, Econ. Advisors Wing, Islamabad, Pakistan

Annual Report. 2007. Zari Taraqiati Bank Ltd, Pakistan.

RELATED WEBSITE www.sappk.wordpress.com, 2009.06.02, agricultural-credit-behind-target) http://www.pbs.gov.pk/content/crops-area-and-production-districts www.pbs.gov.pk/content/methodology-crop-estimate State Bank of Pakistan - The Central Bank http://www.parc.gov.pk www.pbs.gov.pk/content/methodology-crop-estimate www.google.com http://www.ztbl.com.pk/

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