Summary of Proposed Business Plan for Uplift of Agriculture


farm1. Agriculture is the backbone of our Economy. This paper attempts to address issues related to agricultural development, food security, poverty reduction and livelihoods generation and to assess the strength of Zarai Taraqiati Bank Limited to keep contributing effectively to the provision of credit in the rural sector.

2. Three main factors that contribute to agricultural growth are the increased use of agricultural inputs, technological change and technical efficiency. Technological change is the result of research and development efforts, while technical efficiency with which new technology is adopted and used more rationally is affected by the flow of information, better infrastructure, and availability of funds and farmers’ managerial capabilities. Higher use and better mix of inputs also requires funds at the disposal of farmers. These funds could come either from farmers’ own savings or through borrowings. In Pakistan where savings are negligible especially among the small farmers, agricultural credit appears to be an essential input along with modern technology for higher productivity.

3. Pakistani farmers have seen rise in prices of agricultural inputs such as fertilizers, seeds, electricity, water etc. during the decade of 1990s onward which affected the profitability of the farmers. As a result of this, farmers have become interested either to leave agriculture in order to move towards other professions or occupations, or they have fallen prey to money-lenders and middle-men so as to get loans and credits at exorbitant rates of interests. The rising cost of production has made the farmers depend on informal sources of credit since the transactions costs are too high to receive formal credit from the commercial lenders along with the problem of moral hazards. In order to sustain agriculture, huge subsidies were given on inputs (for producers of inputs—firms, and consumer of inputs—farmers) like electricity, fertilizers etc, thus making the entire effort economically unsustainable. It was the large farmers, which benefited from the subsidies provided at the cost of the small and the marginal farmers.

4. Subsidizing interest rates is not the way to help marginal borrowers. Instead, they can be helped through fixed cost subsidies and self-selected targeting. The existing large differentials between the concessional rates of interest charged by ZTBL and market rates is now responsible for rent seeking by the middlemen who re-lend credit, especially to the poor households at higher rates of interest. Large farmers have been the major beneficiaries of long-term loans at concessional rates at the expense of small and marginal farmers.

5. The cultivators borrow from traders on immensely high interest rate prior to cropping season and return the sun in cash or in kind at harvest. In some cases the lender keep farmer’s land on mortgage and some time gold ornaments too are mortgaged to get few buck on loan. Most of the rural loans are spent either on purchase of a seeds, fertilizer or even for marriages of sons and daughters. Although its intensity has decreased to some extent due to availability of more credit from banks at comparatively easy rates, yet it is still going on in most parts of the country.

6. Credit is an important instrument in enabling farmers to acquire command over the use of working capital, fixed capital and consumption goods. Due to the important and increasing role of the non-farm sector as a source of employment in rural areas, the need to cater to credit requirements of this sub-sector has also been a motive factor for the reorientation of the rural credit system in Pakistan.

7. Development assistance for agriculture sector has been declined by the Government over the last two decades, leaving the country more vulnerable to hunger and poverty. Agriculture has been plagued by low productivity and under-investment, making it difficult for Pakistanis to feed themselves and earn an income from farming.

8. Access to tools, fertilizers, seeds, and information is urgently needed to help farmers prevent another food crisis. In the long-term, food security and economic growth will require significant investments in agriculture and rural development with better infrastructure, improved technology and training, and access to financial services, farmers could benefit from increased crop yields and stronger connections to domestic, regional, and international markets.

9. Shortage of finance is one of the major problems facing small farmers. Farmers need financial resource to buy improved agricultural inputs and farm implements so that they can increase their output and income level and break the cycle of poverty. The Government of Pakistan established the Agricultural Development Bank in 1961 to provide a dependable and affordable source of credit to rural areas at a time when commercial lenders avoided farm loans. It was a for-profit lender with a statutory mandate to serve agriculture sector and it well played its pivotal role for uplift of agriculture production in the country till 1990s. Talk about irony; the nation’s largest sub-prime lender, which got rich making “creative” loans to farmers who couldn’t otherwise qualify to purchase the machinery and inputs they were buying, is itself now at the brink of broke.

10. During the year 2002, in line with the Government of Pakistan approved the Restructuring Plan of Agricultural Development Bank of Pakistan in collaboration with the Asian Development Bank to improve its level of efficiency and accountability, poor monitoring of its operations, virtually exclusive dependence on borrowings from the State Bank, unsustainable level of non-performing loans and prohibitively high expenditure on administration and to introduce it as a new autonomous corporate entity. Important elements of restructuring were stated: i. To Put in place a strong and transparent accountability mechanism including a possible association of private sector with the bank; ii. To reduce Government interference to the minimum; iii. To make the Operations of the bank should be transparent, corrupt elements must be dealt with strong hands; v. To improve the Issues of governance. vi. To review the human resource policy and right sizing of the staff. Unfortunately the management could not properly implement the plan established for its restructuring and failed to achieve any of above objectives. The concept of the Debt Restructuring Plan was the logical means of resolving the deadlock between borrowers and the Bank. But it was a far-fetched idea not in consonance with the ground realities in Pakistan. There were not enough subject specialists available to make Corporate Restructuring and Debt Restructuring Plan in the Bank. The farming community needed financial restructuring rather than debt structuring. It is important to encourage the borrowers to overcome their debts and implement restructuring works. Besides badly restructured loans, ill conceived plans as already implemented by the Bank should be discarded. While implementing restructuring plan, both the unwilling and incapacitated defaulters were treated at par which in fact allured the good repay master borrowers waiting for another “Relief package” for discharging their loan liabilities rather than making the prompt repayments. Rather the restructuring backfired; the Bank deprived of its 2200 well experienced and skilled employees, with no positive achievements in addition to sustaining losses worth of billions of Rupees. It will have to be restructured in true sense by introducing a number of strategic changes.

11. Zarai Taraqiati Bank’s failure is due to a variety of causes – gross mismanagement, bad policy making, bad management in making loans; dishonest officials who used the bank’s funds for their own speculations; rumors of insolvency of the Bank, panics to the employees, repeated relief packages for borrowers, adjustment lending to falsely show the high recovery performance, political interference, and number of other causes played role in its failure. The most frequent cause of bank trouble, in fact the almost invariable cause of bank failures, is the granting of credit far beyond the legal and prudent limits and capacity of the borrowers. The Bank’s problems stem from the fact that a large number of its customers can no longer make repayment of installments. Many are faced with huge increases in their payments after an initial low. No Bank tells its customers straightforward that it is suffering from financial crunch as it is not wise on the part of the Bank to do so. Indirectly, its actions send a signal to its customers. The ZTBL has recently issued a circular banning tractor loans which clearly reflects its poor liquidity position. The causes bringing the Bank to the present position are still going on even with more force. I would like to quote following few examples amongst countless others to understand its actual disease so as to cure it properly: a. Successive governments appointed political favorites to head this Bank and indiscriminate unsecured lending under political influence ravaged the balance sheets. Management inefficiencies, narrowed visionary abilities and corruption led to gross mismanagement. Increasing interference of the politicians has now threatened the overall profitability and creditability of this valuable Bank. Corrupt political leaders have in fact destroyed this premier financial institution particularly after 1988. Induction of highly paid so-called “banking experts” and “consultants” has failed either to reduce the extent of bad loans or otherwise improve efficiency of the Bank. b. It is a shocking revelation to see how top Bank management recklessly spend tax payer’s money on some very unnecessary and unproductive political appointees. Even at present a cluster of incapable, inexperienced, and unqualified people consisting of about a dozen Army Officers, two Police Officers, some people removed from other institutions, some people from his own sugar mill, and some other nears and dears having no skill or experience about developmental banking have been appointed by Mr. Zaka Ashraf on top executive positions who unfortunately now constitute the “Management” of the Bank. It is first time in the history of Bank that highest management positions have been filled on political considerations. This so called “Management” is plundering hundreds of millions rupees in the name of high salary packages, perks, and facilities. It is a worst example of misuse of powers. Some of these appointees have no qualifications or experiences as compared to the officials already working in the Bank, and Bank is not fully utilising these dear “brains” to their full potential. Most of the political appointees are very unproductive, unqualified, inexperienced, and very corrupt. Should the government be transparent, it should advertise the positions of top management positions they want filled into the open market and let all the eligible candidates to apply. Only then can we say that the government is transparent and the system of political appointees be done away with. Political Appointees are nothing but “beggars” of the system put in there because they cannot get any employment through the open level playing field of interviews/ tests through applying. When corruption and deploying inefficient and unskilled executives would not be stopped; it is very difficult to bring any betterment and change in the Bank. In spite of their proven inefficiency and lack of skills and experience of the political appointees, the Bank regular officials are receiving less pay as compared to the political appointees who are working with them in the same institution. c. As per report published in “The Nation” on February 23, 2010, three PPP ministers from Tando Muhammad Khan, Larkana and Nawabshah got some 120 tractors worth about Rs 110 million through Benazir Tractor Scheme. The tractors were provided to the kith and kin of three ministers which were a blatant violation of law and day light robbery of national exchequer that deprived thousands of skilful yet extremely poor growers of their due rights. Report says that the informers not only provided records to this scribe but also confirmed that the desired result have been acquired by the ZTBL to oblige the party workers. One Muhammad Rafiq son of Muhammad Sadiq from Bahawalnagar (Punjab) approached the Supreme Court of Pakistan pleading that Chief Justice might take notice of this computer rigging and provide justice to the poor growers. Some influential people compelled the engineers who prepared software for balloting to select their names. “Some 2,108 tractors were gifted to blue-eyed growers as first five digits of their NICs were fixed in the prepared software and all tractors have gone to the PPP activists and supporters a source close to President ZTBL disclosed. d. The Audit officials have recently briefed the Honorable Public Accounts Committee that Zarai Tariqiati Bank Limited (ZTBL) had not been cooperating in audit since last two years despite the fact Auditor General of Pakistan had been conducting its audit in the past and requested the Public Accounts Committee to direct ZTBL to get its audit by Auditor General of Pakistan. The committee directed that law should take its course in this regard. Secretary Finance asked ZTBL representative that issue should not be presented before the committee again and follow the law otherwise strict disciplinary action would be taken against the responsible person. In spite of clear orders the Bank has not yet been got audited through the AGP. e. The State Bank of Pakistan has recently informed the National Assembly’s Standing Committee on Finance that ZTBL President Zaka Ashraf was appointed without the clearance of the regulator. The Committee was briefed by the Governor of SBP, Syed Salim Raza over the working of the Bank.“We did not give any clearance for the appointment of ZTBL president,” assertion of the SBP team led by Salim Raza shocked most of the committee members who wondered as to what would be the legal status of the decisions taken by the president and the board of the ZTBL. The Committee was told that although the power lies with the Ministry of Finance, the final authority, clearance from the SBP is prerequisite in the light of law of the country. There was also no answer as to what would be the legal status of the decisions taken by these appointees. f. Honorable Public Accounts Committee of the National Assembly has also investigated in detail that how a huge public money was written off during the last five years 2004-2008. A total of 20,439 borrowers of more than one lac and 117,042 borrowers of less than one lac were given benefit by writing off Rs 10.132 billion and Rs 2.714 billion respectively. g. Another controversial project has been signed between ZTBL and Chinese companies to providing electricity for farmers by installing windmills and solar panels through Chinese companies for which funding to the said Chinese companies would be provided by the ZTBL in collaboration with AEDB. About 2,000 to 3,000 MW will be produced from those windmills and solar panels. It is general perception that this deal has been finalized with the Chinese companies on extraordinary high prices. h. Financial misappropriations are very common in the Bank. The Bank has paid millions of Rupees to the counsels hired for personal cause of Mr. Zaka Ashraf to defend a writ of Quo Warranto filed by Mr. Muhammad Iqbal Khattak. Similarly, it is heard that Mr. Zaka Ashraf has paid Rs. 5 billions out of pension fund of the employees to UBL in connection with rental power projects. Millions and millions Rupees are reported to be plundered in procurement. i. Mr. Zaka Ashraf, in spite of being patently illegal appointee himself, has appointed thousand of MCOs and other staff in ZTBL and its subsidiary KSSL quite unnecessarily without any proper advertisement and without observing the merit. These thousands of people have been appointed either to accommodate the party workers or for bribe taken either by the Bank officials or by the public representatives of PPP. It can be well imagined that if a person gets appointment by paying money, what he will do while working in the field. j. There are lavish expenditures going on in the Bank irrespective of its financial health. Just imagine, in some cases annual increments of Rs.75000/- to Rs.100000/-, and high bonuses are allowed to some of the executives. Nobody is there either in the Board of Directors or in the management to care for the institution. No financial discipline can be seen in the Bank at any level. This premier institution has been made a play thing and has now been handed over to Mr. Zaka Ashraf to play with. k. The Bank has been practically converted into a sale organization with little interest in banking not in public interest but for personal gains. l. Wrongdoings have emerged in the Bank on a vast dimension in the new era. The bank has become inefficient and corrupt. Today it is an irony that bank executives have come more under the preview of vigilance scrutiny. The custodians of public trust and confidence are increasingly becoming untrustworthy. There is today an urgent need for strictly guarding the guardians of the Bank. The middle management has become dumb rubber stamps to blindly ditto whatever instructions are received from the illegally appointed top management. Lack of professional training, quick promotions of the top and middle management, and cross-country transfer of staff, without planning a regular career path for them have resulted in imperfect operations. m. The executives regularly hold meetings but with no avails. The top most executives normally intended to provide collective wisdom and inter disciplinary expertise is acting as merely a rubber stamp, leaving the field exclusively to the whims and arbitrary fancies of the President. This absolute power with no in-built checks and controls on the Bank has served as the main crippling effect for the decay and downfall of the Bank. n. The weakness of the management has become a fertile ground for breeding widespread corruption at different centers, starting from the Head Office, and extending to the Regional office and finally the Branches. President of the Bank occupy arbitrary powers in a brief period of contract tenure, sure to be terminated at the near future. He lacks vision, foresight and motivation for long-term building of an edifice or culture for the Bank, but he looks only towards short-term objectives. o. The Bank management is absolutely unable to see far enough in the future the implications of window dressing and manipulations being done presently. The emergence of NPLs in the balance sheet of the Bank has crippled its profitability and reduced its capital adequacy. The Bank is being shown as profit showing bank only due to recovery in loans written off by the previous regime only “to clean the balance sheet”. p. Charge sheet is a weapon to be served on the really guilty, who disobey authority or who are caught involved in corruption to enforce discipline and cleanliness in services. Instead, innocent and honest employees are being served a spate of charge sheets in a routine manner that does not “cooperate” with the management. Misusing powers on the meeker sections of the officers in the middle and lower management and staff through blatant application of malice and victimization for personal reasons in the guise of taking disciplinary action by this corruption-ridden management has disheartened the honest staff working in the Bank. This manifests as deception and fraud in conducting inquiries. How the tool is being used to settle score and to strike on those not dear or near to the bosses, needs no illustration. q. Unjust decisions taken by the management in the Bank providing shelter to the corrupt elements and creating embarrassing position for honest and dedicated employees has resulted into a huge and infinite litigation in the Bank. The things are even on record to show that the Bank was burdened with this unnecessary expense merely with the intention that cost is being born by the Bank and not from the own pocket of the management. r. The most of top Bank executives are quite unfamiliar with the problems holding the field. They too deal in papers and reports and expect things to be done by writing down notes. Productivity can not be increased just by writing notes. It requires proper vision and skill to remove the hurdles lying in the way. The whole devastation is because of the weak policy making tendency of the senior management. There is no goal-setting, there is no spirit, and there is no mission and above all no honesty of purpose. Corruption at the lower level is fought, but incidence of corruption is proportionate to the exercise of power. The senior executives in top management are more vulnerable to the lure and temptations of office and power.

12. There has been alarming increase in the amount of non-performing loans (NPLs) during the last 30 months of the present government. Bank performance also acts as a key cause of non-performing loans. The Bank should be selective as to which good borrowers it accepts. Due to doing poorly in these areas the ZTBL has created more nonperforming loans which have become a major problem because of political interference and directed credits.

13. Repayment from borrowers belonging to rural sector in Pakistan has drifted to lower side due to wrong Bank/ Government policies. Agriculture sector is undoubtedly unorganized profession and a world of uncertainty; its success and failure depends on climatic factors, since there is always possibility of non-repayment by a borrower. The main thing to be kept in view is that collateral should be based on potential credit worthiness of borrowers, elimination of credit subsidies and no new loan facility to previous loan defaulters till three years.

14. There are several avenues in banking and financial sectors, which have not yet been properly opened up in Pakistan. The Bank should add new products and services to improve productivity. Business Process of Reengineering for Zarai Taraqiati Bank is a critical phenomenon for the overall economy of Pakistan. With little sincere efforts this presently ailing government-owned bank can be transformed into a highly profitable, self-reliant financial intermediary, turned into a major microfinance provider offering carefully crafted micro-savings and microcredit products to low-income people at market rates of interest, and can won the reputation as a successful rural financial institution and developing world’s largest microfinance institution if it: • comply with all relevant legislation, codes of conduct and standards of good corporate practices; • Promote and facilitate the engagement of all its shareholders in the direction of the bank and provide them with a return on their investment; • conduct its operations in an open and transparent manner; • put local resources to work for local development, serving the rural community and its aspirations; • provide a full and balanced range of financial products and services that satisfies the needs of the rural population of Pakistan, on a profitable and sustainable basis; • strive consistently to provide improved products and services to its clients at reasonable cost, using modern banking, information and communication technology in the most appropriate form to its clients needs; • be vigorous in building a reputation for professionalism, competitive, pricing, reliability and quality of service and innovation; • operate in accordance with best banking practice, acting with financial prudence and keeping in mind the need to balance profitability with asset preservation and liquidity and to safeguard depositors’ funds; • work together with its employees to develop their capabilities to contribute to achievement of the bank’s objectives, promoting excellence, rewarding achievement and providing them the opportunity to share in the bank’s success; • develop mutually acceptable relationships with government in the pursuit of improvement in living standards in rural areas, while respecting best financial practices; • ensure that its activities contribute to the environmental stability and overall improvement of living standards in Pakistan; and • judge the bank’s success against measures that include profitability, portfolio quality in terms of minimal arrears and non-performing loans, portfolio worth, total deposits, geographic outreach and public image; • utilize the Bank’s network on full potential; • Improve deposit to loans ratio;

15. The growth of any sector of the economy depends on the growth of and support it receives from other sectors and the extent of integration between activities in different sectors. Until now the growth of Pak agriculture has been severely constrained by the weakness of its linkages with other key sectors, including industry, agricultural education, banking, insurance, marketing and infrastructure. A conscious effort to strengthen these linkages can stimulate rapid growth in this sector resulting in rapid growth in employment opportunities.

16. The credit should be designed to stimulate the growth of Pakistan’s agricultural economy, through predominantly pro-poor activities, directed primarily at small and marginal landholders, poor fishing communities, and the landless. Rural communities may be impacted directly by the credit operations. The Bank should provide access to improved farming supplies, market linkages, and information about improved cropping systems that will help farmers increase their incomes while better protecting the soil and environment. It may also be ensured that small farmers have access to markets, and receive the training and information they need to manage cash crops, form farmer collectives, and sustain economic growth over the long-term.

17. The thrust of my suggestions is to directly utilize agriculture as an engine to raise on-farm incomes and purchasing power, generate additional on-farm employment opportunities, and stimulate rural industrialization and services. These would in turn increase demand for agricultural products, manufactured goods and services throughout the economy, creating a multiplier effect that generates jobs in other sectors. The specific focus on the strategy should be on raising on-farm productivity and fostering closer linkages with industry and markets through innovative approaches to the organization of the rural economy. An integrated effort needs to be put in by the Zarai Taraqiati Bank by introducing in private sector SOIL TESTING LABORATORIES, FARM ADVISORY INTELLIGENCE SYSTEM, RURAL INFORMATION SYSTEM, AGRICULTURE SERVICE CENTERS, and FARM SCHOOLS. Once these services are in place, there is ample scope to raise average productivity on a wide range of crops by a factor of 100 to 200% or even more by focusing on improved methods for plant nutrition, land preparation and irrigation. Rapid dissemination and adoption of this technology can be accomplished through an integrated package of strategies that includes the following: 1. There is enormous scope for raising the productivity of agriculture, doubling crop yields and farm incomes, and generating significant growth in demand for farm labor. Improving plant nutrition through micronutrient analysis and improving irrigation through deep chiseling of soil can result in a tripling of crop yields. 2. Rising rural incomes consequent to higher productivity will unleash a multiplier effect, increasing demand for farm and non-farm products and services, thereby stimulating rapid growth of employment opportunities in other sectors. 3. In addition to Farm Schools to impart advanced skills in production agriculture, a network of government-certified, rural vocational institutes providing training and certification in hundreds of vocational skills need to be established. 4. Pak agriculture is constrained by weak linkages between agricultural training and extension, crop production, credit, processing, marketing, and insurance. An integrated strategy is needed for bringing together all these elements in a synergistic manner by: a. Establishment of village-based Farm Schools in private sector to demonstrate and impart advanced technology to farmers on their own lands. b. Establishment of a network of sophisticated soil test laboratories capable of high volume precision analysis of 13 essential plant nutrients coupled with development of expert computer systems to interpret soil test results and recommend individualized packages of cultivation practices for each crop, location and soil profile. c. Establishment of Rural Information Centers to act as a medium for transmission of soil test data and recommended practices, access to current input and market prices, and other essential information for upgrading agriculture. d. Encouraging contract farming arrangements between agri-business firms and self-help groups in order to increase small farmers’ access to advanced technology, quality inputs, bank credit, processing, marketing and crop insurance. e. Strengthening farm credit and insurance programs, including creation of linkages between crop insurance, crop loans, and farm school training to encourage farmers who seek credit and crop insurance to adopt improved cultivation practices.

18. ZTBL should devise a regular information service and insist the farmers to enroll in the farm schools and apply for soil test analysis as conditions for bank loans or at least offer differential rates to those who do so, since both measures will improve crop production and reduce risks. The promotion of contract farming will ensure the farmer and the bank of a ready market for the farmers’ produce and provide an intermediary with the organizational capacities to facilitate banking, insurance and input procurement by small farmers.

19. Risk Management: ZTBL should take initiatives for strengthening risk management practices. The issues related to Credit Risk should be addressed in the following manner: Loan Policy. Credit Monitoring Policy. Credit Risk Management Policy. Collateral Risk Management Policy. Recovery Policy. Treasury Policy. The Board of Directors should have the overall responsibility of ensuring that adequate structures, policies and procedures are in place for risk management and that they are properly implemented.

20. Insurance: Crop insurance scheme should be introduced linked, on a compulsory basis, with the crop loan system…. The entire amount of the crop loans should be insured.

21. Good Management: The essential components for good management to be in place in the Bank are that it: • Is driven by top skilled management. • Focuses on profitable customer fulfillment. • Requires everyone to be highly trained. • Is data driven, not based on beliefs or conjecture. • Requires disciplined and methodical (i.e., scientific) problem solving approaches. • Fosters continuous process and product improvement through resource alignment.

22. Grievance Redressal Policy: The Bank should set a vision to maintain its position as number one Bank in terms of farm credit. Towards this end, Bank should ever remain alert and sensitive to customer complaints and uses it as a tool for removing deficiencies in service at all levels. The adoption of Banking Codes and Standards Policies of State Bank of Pakistan places greater responsibility on the Bank to meet higher standard of customer expectation. Bank should use customer education, customer awareness and transparency as tools for reducing grievances and enhancing customer satisfaction. • Instituting an annual performance review of the Bank is a critical way of ensuring that work is being done, and done well, and promoting transparency and accountability within the Bank. Conducting such reviews will identify red flags regarding corruption before they have drastic effects. • In order for this to be a feasible policy alternative, Bank administration would need to create a separate department tasked simply with performance measurement and management, who will be completely independent, objective, and expert-driven.

23. Governance reforms: The governance reforms that are badly needed in the Bank are: (1) Reform of the enabling environment for rural finance by reviewing rules on provisioning requirements. (2) Reforming and implementing a new legal framework for secured transactions. (3) Development of new products and lending technologies for rural finance. (4) Better internal control and appropriate management information system.

24. Composition of Board: The members should possess relevant expertise and be of a mix of backgrounds and perspectives. The Board should act in the best interest of ZTBL, taking into account the interests of all stakeholders, while ensuring financial sustainability of the bank.

25. Accountability: A strict system of accountability is needed in the Bank.

26. Corruption: Corruption in ZTBL remains a substantial obstacle in its proper functioning where it is perceived to be widespread and systemic in the present regime. Most governance indicators show an unchanging rather worst situation in the Bank now deeply entrenched at all levels. Corruption manifests itself in various forms in the Bank, including widespread financial corruption, nepotism, without merit appointments, misappropriation of Bank’s funds, writing off Bank’s loans, offering six figures salary packages to near and dears, paying highest fees in millions to the blue eyed counsels, and misuse of power in other functions causing huge losses to the Bank. Both petty and grand corruption is prevalent in the Bank. Farmers commonly face demands for bribes in their dealings with loan cases.

27. Poverty Alleviation: This is not possible without financial inclusion as a means of empowerment and pre-supposes some exposure to financial literacy and banking system. Without a strong support system, poverty alleviation will remain a dream unless financial margins of farmers and rural artisans are improved. Also cluster development for farm and off farm activities would help in creating employment opportunities for rural growth. The key to poverty alleviation is ensuring livelihoods in and around villages in rural areas.

28. The Rural Services Sector: Credit for the rural transportation sector and other rural services sector such as cheap rural housing, drinking water, sanitation systems, rural eco-tourism and renewable rural energy, the credit flow is virtually non-existent. Unless lending to these sectors is stepped up, the quality of rural life will not improve and the unending migration of rural youngsters to urban areas in search of livelihoods and jobs will continue.

29. Microfinance: Microfinance brings the power of credit to the grassroots by way of loans to the poor, without requirement of collateral or previous credit record. It has proven an effective and popular measure in the ongoing struggle against poverty worldwide, enabling those without access to lending institutions to borrow at bank. The Bank should open a window for micro-financing, or in alternate Bank should establish a subsidiary for this purpose.

30. The countries which previously followed development strategy based on industrialization alone soon realized that without an expanding agriculture sector, the urban labor force would not be able to buy food at reasonable prices, there would be no supply of raw materials for industries, and the majority of population living in rural areas would not have the purchasing power to buy goods produced by the industries. Now, even among those developed countries where manufacturing and the service sectors are considered to be the driving force of the economy, the agriculture sector is still prioritized to remain an important contributor, especially in the food production. The agriculture credit sector is contributing significantly to the growth of their economies. Most of the countries have set up their rural credit systems being run as state-owned statutory bodies headed by highly professional top management supervised by professional boards who are responsible to arrange, provide, supervise and co-ordinate credit for agricultural purposes. The idea for those state-owned entities is uniformly to embark on the maximum food production and to ensure the full realization of maximum economic and social benefits. During the instant year Paraguay, a small agricultural country has reached an unprecedented 14.5 per cent economic growth by adopting good management practices thus seeing a notable recovery of its economy by record cereal, soy and beef exports. On the contrary our country has handed over the whole system to non serious people to play with and enjoy, just as a reward to party loyal. It is a very sensitive sector needing concrete attention because 170 million people are wholly dependent on this sector. Political rewards can be given by some other way. But this sector requires to be supervised by purely professional people. Otherwise our rural finance system and ultimately the agricultural production will collapse. This paper is just an outline. There are a number of other measures to strengthen the Bank, the agriculture base, and resultantly overall economic of the country. I will devise a complete working plan covering each and every aspect with justifications, costs, and legal requirements if the Government of Pakistan may so desire.


Shaukat Masood Zafar

Cell: 0333-5499592

Muhammad Ramzan Rafique
Muhammad Ramzan Rafique

I am from a small town Chichawatni, Sahiwal, Punjab , Pakistan, studied from University of Agriculture Faisalabad, on my mission to explore world I am in Denmark these days..

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