The Pakistani government has approved a Ministry of Finance Credit Guarantee Scheme that encourages banks to finance smallholder farmers by sharing 50 percent of the loan default risk. The government has allocated PKR 5 billion (USD 49 million) for the program, which will disburse loans starting at PKR 100,000 (USD 985) with a maximum tenure of one to one-and-a-half years. The loans may be used to finance farmers with landholdings of up to five acres in canal-fed and 10 acres in rain-fed areas.
The program, which will be executed by the State of Pakistan, complements the bank’s existing initiatives for the financial inclusion of marginalized farmers and businesses in the country, including a Credit Guarantee Scheme for Small and Rural Businesses and a financial literacy and awareness program designed for farmers, both launched in 2013.
By Mathew Cerf, Research Associate
About State Bank of Pakistan
Established in 1948, the State Bank of Pakistan (SBP) is the central bank of the nation of Pakistan. Its primary functions include “issue of notes, regulation and supervision of the financial system, bankers’ bank, lender of the last resort, banker to Government, and conduct of monetary policy.” Its secondary functions include “management of public debt, management of foreign exchange, and other functions like advising the government on policy matters.”
Sources and Additional Resources
[1] The Nation, “Credit guarantee scheme for small farmers approved,” http://nation.com.pk/business/18-Mar-2015/credit-guarantee-scheme-for-small-farmers-approved
[2] MicroCapital Brief, “State Bank of Pakistan Launches Financial Literacy and Awareness Program for Farmers,” https://www.microcapital.org/microcapital-brief-state-bank-of-pakistan-launches-financial-literacy-and-awareness-program-for-farmers/
[3] MicroCapital Brief, “State Bank of Pakistan (SBP), World Bank (WB) to Develop National Financial Inclusion Strategy for Pakistan,”https://www.microcapital.org/microcapital-brief-state-bank-of-pakistan-sbp-world-bank-wb-to-develop-national-financial-inclusion-strategy-for-pakistan/
[4] MicoCapital Universe Profile, “State Bank of Pakistan,” https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=State+Bank+of+Pakistan
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