Uzair bin Farid

The privatisation of agriculture banking and the introduction of market-friendly policies can bring swift development to the agriculture sector, said an economic expert. Deregulation will help introduce market forces into agri-finance, allowing for efficient allocation of savings towards modern, high-tech, and low resource-incentive agriculture. Ijaz Ali, research economist at the Centre for Business and Economic Research, told WealthPK that public banking institutions represent the ‘dead-capital’ of Pakistan’s economy. “Modern competitive economies are sustained by financing from the private sector and households through financial institutions like banks,” he said.

Ijaz said these banks collect savings from households and consumers and then lend them as loans to private entities willing to invest in new areas of research and innovation. However, in Pakistan agri-financing is dominated by public sector financial institutions like Zarai Taraqiati Bank Limited (ZTBL.) Ijaz said that since Pakistan is an agricultural country, it is important to have a vibrant and competitive agri-finance industry. The creation of such an industry is only possible after undertaking market-friendly reforms. “When the agri-finance sector is deregulated, more players will enter the market and competition will drive growth in financing at suitable interest rates,” he explained.

“Right now, there is only one bank that dominates the agri-finance in the country and that is ZTBL,” he said. Ijaz said the mechanism of money distribution through ZTBL leaves much to be desired. Poor farmers deserve to get benefit from official channels of agri-financing, which is possible through deregulation where merit is the only consideration in that scenario. “We urgently need land reforms to break up the monopolies of big landlords. Land reforms coupled with banking reforms in the agriculture sector will help Pakistan boost its agricultural productivity,” he explained.

Credit: Independent News Pakistan-WealthPk