http://www.technologytimes.pk/mag/2011/feb11/issue02/uplift_of_argriculture_to_be_taken.php13. 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.
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