ISLAMABAD:
The Economic Coordination Committee (ECC) has raised concerns over the exclusion of small farmers from Punjab and Sindh under a proposed Risk Coverage Scheme for underserved areas. In a recent meeting, the ECC directed the State Bank of Pakistan (SBP) to review the eligibility criteria restricting participation from these two provinces and to present a separate briefing on the matter in its next session.
The scheme’s total budgetary requirement for risk coverage and operational costs of banks has been estimated at Rs37.5 billion, spread over FY27 to FY31. This includes Rs30 billion for risk coverage and Rs7.5 billion to cover operational costs incurred by banks for acquiring new borrowers. However, the current allocation is limited to small farmers in Khyber-Pakhtunkhwa (K-P) and Balochistan, effectively excluding Punjab and Sindh.
ECC members expressed concern that the scheme could be misused by large landowners and stressed the need for equitable access across all provinces. It was pointed out that in K-P and Balochistan, all landholding categories are eligible, whereas in Punjab and Sindh, only subsistence-level small farms would qualify under the proposal. The ECC questioned the logic behind this disparity and sought a reassessment.
The SBP explained that the scheme is designed for a three-year period, during which an ecosystem is expected to develop enabling banks to finance small farmers in the future. The initiative, developed in consultation with the Pakistan Banks Association (PBA), follows discussions in the Priority Sector meetings chaired by the finance minister. It supports production loans for crop, dairy, livestock, and fisheries sectors in remote and underserved areas.
Under the scheme, farmers can access loans of up to Rs3 million with a 12-month repayment period — extended to 18 months for sugarcane farmers. The initiative aims 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’ agri-loan portfolios for both new and incremental borrowers.
To promote outreach, banks will receive an operational subsidy of Rs10,000 per borrower. The scheme is set to replace the existing Credit Guarantee Scheme for Small and Marginalised Farmers (CGSMF).
The planned allocations are Rs8.725 billion for FY27 (Rs6.225 billion for risk coverage and Rs2.5 billion for operations), Rs12.45 billion for FY28, Rs12.5 billion for FY29 (entirely for risk coverage), and Rs3.775 billion for FY30.
The ECC approved the scheme in principle but instructed the Finance Division and SBP to revisit the exclusion of Punjab and Sindh and present a detailed clarification in the upcoming ECC meeting.
