1. Safeguarding Agriculture production through access to finance and insurance DAWN Pakistan Food & Agri Expo Conference 2016 PRESENTATION BY: Mr. Noor Ahmed State Bank of Pakistan

2. Presentation Outline NFIS: Targets for Financial Inclusion in Pakistan Financial Inclusion Initiatives Pakistan’s global recognition in Financial Inclusion Financial Inclusion: SBP’s Strategic Goal SBP’s Approach for promotion of Agri-Finance Impediments & Interventions Market Infrastructure Agri-Finance Performance SBP’s Approach Towards Agri- Finance Development Crop Loan Insurance Scheme Livestock Loan Insurance Scheme Credit Guarantee Scheme for Small Farmers Insurance & Risk Mitigation Schemes for Agriculture Financing Promotion of Innovative Agri. Financing Procedures Capacity Building Programs Special Focus on Agri-Financing in Underserved Districts Way Forward

3. SBP’s Three Pronged Approach towards Financial Inclusion Proportionate Prudential Regulations to address Sector Specific Risk in Microfinance, SMEs, Consumer Finance, Agri, Islamic Banking etc Challenge grants for innovations in Agri finance Branchless Banking 1 st A2F Survey Public Private Partnerships - Risk sharing and Insurance Facilities Smart subsidies for Capacity Building of providers International partnerships with FAO & APRACA in Agri. financing NFIS and focus on client capacity Perceptive and Innovative Regulations Development of Market info and Infrastructure Capacity Building of providers and client Financial Inclusion: SBP’s Strategic goal

4. Pakistan’s global recognition in Financial Inclusion Pakistan’s Financial Inclusion efforts are being globally acknowledged  Pakistan’s MF Regulations and Business Environment rated amongst the best in the world (EIU report)  Pakistan ranked 5 th in the world in promoting Financial Inclusion  CGAP acknowledged Pakistan’ Public Private Partnership for leading digital financially inclusive system  SBP amongst the founding members of AFI

5. State of Financial Inclusion in Pakistan Level of Access – 42 million bank accounts – 28.1 million plastic cards issued – 15.2 million mobile financial services accounts Financial Inclusion - Progress Percentage of Adult population that has: 20152008 A.Bank Accounts16%11% B. Other formal7%1% Formally Served (A+B)23%12% C. Informally Served24%32% Financially Served (A+B+C)47%44% Financially Excluded53%56% Women availing banking services from 4% (2008) to 11% (2015). Access Points − 11,469 Bank Branches − 44,383 POS devices − 10,100 ATMs − 301,823 BB Agents

6. Progress on Financial Inclusion Indicators SectorIndicatorJun-11Jun-12Jun-13Jun-14Jun-15Dec-15 Indicator of Access to Credit SME Finance Outstanding SME Finance (Rs. in Bn) 271258234253261305 No. of SME Borrowers157,658149,421144,141134,521152,495158,387 Microfinance Gross Loan Portfolio (Rs. in Bn) 283447618190.79 No. of borrowers (No. in Mn) 2.0302.2322.6353.1443.5073.630 Agricultural Finance Agricultural credit disbursement (Rs. in Bn) 263294336391516 247 (half year) No. of Agri borrowers (No.in Mn) 1.4451.9601.9902.1512.1852.27 Housing Finance Outstanding Housing Finance (Rs. in Bn) 625752535661 No. of borrowers95,55387,05979,47874,89470,08070,498

7. Financing to agri. sector accelerated in last Seven years (Rs. In Billion) 7 Performance of Agriculture Financing More than half of the agri-financing requirement is being met through formal channels More farmers are being tapped each year Industry NPLs are decreasing

8. Changing Market Structure of Agri. Financing

9. Intervention for growth in Agri. financing  Shift from mandatory target regime to market based indicative targets  Enabling Regulatory environment for Agri. financing- Supportive PR.  Inclusion of new banks including Islamic & Microfinance Banks  Pilot Projects to focus underserved agri. intensive districts  One Window Operations  Risk Mitigation Tools like Crop & Livestock Insurance, Credit guarantees  Introduction of innovative models through FICF  Capacity Building & Awareness for banks & farmers  Shift from mandatory target regime to market based indicative targets  Enabling Regulatory environment for Agri. financing- Supportive PR.  Inclusion of new banks including Islamic & Microfinance Banks  Pilot Projects to focus underserved agri. intensive districts  One Window Operations  Risk Mitigation Tools like Crop & Livestock Insurance, Credit guarantees  Introduction of innovative models through FICF  Capacity Building & Awareness for banks & farmers

10. De-risking Agriculture financing  Crop Loan Insurance Scheme  Livestock Loan Insurance Scheme  Contact Farmer Financing Agreements  Credit Guarantee Scheme for small farmers To mitigate the risk of losses due to natural calamity and encourage banks to finance agriculture and livestock sector, SBP with support of Government launched following de-risking tools for farming community specially for small farmers;

11. Objective: To share risk of farmers against natural calamities Premium: Up to 2% per crop per season reimbursed to banks Coverage: Five Major crops - wheat, rice, maize, cotton & sugarcane. Province wise small farmer’s classification and eligibility of farmers for CLIS in terms of landholding is as follows: Crop Loan Insurance Scheme

12. Objective: To encourage banks to lend to small livestock farmers Coverage: Premium up to 4% reimbursed to banks against financing of livestock (Rs. 300 million was allocated for the FY 2014-15 against 100,000 beneficiaries) Risk covered: Death of animals due to disease, flood, heavy rains, storm or accident Livestock Insurance Scheme for Small Borrowers Period No of borrowers Amount Insured Premium Claimed July-Dec 2014 17,3513,06268 Jan-June 2015 54,97610,352224 Total72,32713,372293 Credit Guarantee Scheme for Small & Marginalized Farmers Objective: To encourage Banks/MFBs to provide collateral-free financing to small farmers through credit guarantee on risk sharing basis Potential Borrowers: 400,000-500,000 farmers to benefit from this scheme. Up to 5 acres of land in canal-fed and 10 acres in rain-fed areas Loan Size: Maximum up to Rs. 100,000/- per borrower for production (crop) loans only Amount in Millions

13. Way Forward Innovative Rural & Agricultural Financing Value Chain and Warehouse Receipt Financing Markup Free Solar Tubewell Financing Technical & Financing Assistance through Service Provider Capacity Building Farmers Financial Literacy Programs Training Programs for banks and Farmers through local and International partners. Agriculture Centre of Excellence Agri-Financing in Underserved Districts Expanding financial eco system for financially excluded segments Awareness campaign on livestock and other essential areas like Solar Energy, Farm management, etc. Regularize One Window Operation Promotion of Islamic Agri Financing

14. 14 Thanks!