By Shaukat Masood Zafar
A summary of proposed business plan for uplift of agriculture activities through integrated initiatives to be taken by the ZTBL
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.
A summary of proposed business plan for uplift of agriculture activities through integrated initiatives to be taken by the ZTBL
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.
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