EDITORIAL: In a candid written submission to parliament, Finance Minister Muhammad Aurangzeb has laid bare the mounting pressures on Pakistan’s agriculture sector, citing deep-rooted challenges, ranging from declining crop yields and rising input costs, to climate shocks, outdated farming practices and a growing exodus of farmers to cities.
He further warned that a sharp slump in farm lending has become one of the central factors contributing to this crisis, depriving farmers of the liquidity needed to sustain operations and adapt to climate stress.
The resulting cash flow crunch, particularly for small landholders, has left many unable to purchase quality inputs or withstand price shocks, deepening rural distress and accelerating the drift away from farming.
That small landholders are bearing the brunt of this crisis is especially worrisome, as the recent agriculture census shows that around 97 percent of the country’s farmers own less than 12.5 acres of land, indicating that the malaise runs through the length and breadth of rural Pakistan, making this disarray truly all-encompassing.
Small and fragmented landholdings, together with the persistent credit and liquidity crunch, have become structural impediments to achieving economies of scale, trapping farmers in a vicious cycle of low productivity and financial precarity.
As the minister noted, cash flow problems in farming stem from crop failures, low yields and volatile market prices that delay repayments. And the situation has worsened further as credit disbursements by the country’s main agricultural lender, Zarai Taraqiati Bank Limited, have plunged by 54 percent in just two years — from Rs 85.66 billion in 2024 to a mere Rs 39.66 billion this year.
Given the primacy of agriculture in Pakistan’s economy — directly and indirectly employing nearly 70 percent of the population, contributing 24 percent to GDP and anchoring major export industries like textiles — even the higher 2023 lending figure appears disappointing, let alone the much lower one now.
While farmers share responsibility for the sector’s decline — resisting modern farming techniques and equipment, insisting on labour intensive practices and relying on poor quality seeds — the fact remains that any effort to reform and modernise would in any case inevitably be hampered by limited access to credit, particularly for small landholders whose thin cash flows leave little room for investment in improved practices. It goes without saying then that it is imperative that the government tackle the chronic shortage of agricultural financing alongside efforts to promote modern, climate-resilient farming.
Some of the federal government’s recent measures are steps in the right direction. In August, it launched the Risk Coverage Scheme for Small Farmers to expand bank financing for small, marginalised and previously unserved farmers, aiming to enhance financial inclusion and revitalise agriculture.
Building on this, the State Bank of Pakistan has now introduced the National Subsistence Farmers Support Initiative, an end-to-end digital platform offering collateral-free loans to subsistence farmers and tenants through a centralised online portal.
Under the scheme, applications verified and assessed via the Land Information Management System will be forwarded to the applicant’s chosen bank, with at least 75 percent of financing disbursed in kind to ensure the supply of quality inputs such as seeds, fertilisers and pesticides from approved agri-merchants, and the remaining 25 percent released in cash for ancillary expenses. Farmers will also receive advisory support to improve yields.
The impact of such initiatives, however, will ultimately depend on whether the banking system can translate these well-intentioned schemes into real, accessible credit, and on whether small farmers and tenants possess the digital literacy, access to digital resources and formal economic records needed to navigate verification requirements through banking channels.
At its core, agriculture recovery will depend on aligning financial innovation with ground realities to ensure sustained credit access and real empowerment of small farmers.
Copyright Business Recorder, 2025
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