ADB's 2nd tranche meant to support ZTBL restructuring

Asian Bank released on December 6, 2004, 50 million dollars for the second tranche of the ongoing 250 million dollars Rural Finance Sector Development Programme (RFSDP). The proceeds of the second tranche is meant to support the ongoing restructuring of Zarai Taraqiati Bank Limited (ZTBL), capacity building of commercial banks for enhancing their rural finance portfolio, and institutional strengthening of new rural micro-finance banks.
The first tranche of 100 million dollars, released in December 2002, was invested in the financial restructuring of ZTBL.
RFSDP goal of enhancing access of farm households to affordable agriculture credit complements the government's policy priority for accelerated growth in the rural sector.
Proactive policy stance of the government and the State Bank of Pakistan (SBP) enabled the commercial banks, as a group, to emerge as the largest provider of agriculture credit in 2004. This is a positive trend, as commercial banks with nearly 3,000 rural branches are well placed to bridge the demand and supply gap in agriculture credit.
Rationalisation and simplification of agriculture credit policies, processes, and documentation and documentation undertaken by the SBP will further enhance the access of farm households to agriculture credit. The ongoing legal, financial, operational, and organisational restructuring of ZTBL has improved governance and accountability.
The new senior management team recruited by ZTBL under RFSDP is expediting institutional reforms. Immediate priorities for the new senior management team include installation of state-of-the-art information technology and management information systems, reduction in transaction costs, and staff skills development.
ZTBL is fully cognisant that substantial improvements in repayment rate is the most critical factor for its financial viability, service delivery, and its ability to service debts. On their part, the government and SBP are facilitating re-pricing of debts and settlement of loans of non-willful defaulters.
The establishment of Rural Finance Resource Centre at the National Institute of Banking and Finance, a SBP subsidiary, will help incorporate internationally successful rural finance practices in commercial banks and ZTBL.
Proactive development of new products and services, such as agriculture insurance and commodity futures trading, are also encouraging developments for the agriculture sector.
These along with increasing participation of commercial banks in rural finance and a reformed ZTBL will facilitate enhancement of agriculture credit for improving the economic prospects for the two thirds of the population that depend on the rural sector for their livelihoods.