SBP takes significant steps to grow agriculture, SME, digital & technology sectors of banking industry

KARACHI: The Governor State Bank of Pakistan (SBP), chaired the second Steering Committee meeting on July 4, 2024, on initiatives aimed at boosting the agriculture, small and medium enterprises (SME), and digital & technology sectors within the banking industry.

These steps are part of SBP and the Pakistan Banks Association’s (PBA) ongoing efforts to promote financial inclusion and support economic growth in the country. SBP has issued letters to all banks to develop and submit their five years of Agriculture and SME finance expansion plans and strategies to significantly grow these portfolios over the next five years.

As part of its Vision 2028, SBP aims to increase its outstanding Agri-finance portfolio to Rs 1,000 billion with total disbursements exceeding Rs. 3,000 billion by the end of June 2025.  It further envisions doubling the SME financing to Rs. 1,100 billion over the next five years with Rs. 100 billion to be added by June end 2025.

The SBP is working closely with PBA to support commercial banks to enhance their lending in both sectors to stimulate entrepreneurship, create jobs, help farmers improve productivity, invest in modern equipment, expand their operations, and drive economic development at the grassroots level.

Furthermore, the Central Bank has taken measures to promote digital and technology-driven solutions in the banking sector by encouraging banks to adopt innovative technologies to grow digital payments, and develop digital lending platforms to improve access to financial services for underserved populations and drive efficiency, especially in Agri and SME industry, and above all reduce cash in circulation to achieve much-needed reduction in inflation, thus, interest rates.

PBA highlighted its key initiatives for deepening and broadening financial services for priority sectors including;

1. Development of SME and Agri Environment and Performance Index (SEPI/AEPI) for assessing, improving, and sustaining the performance of both sectors
2. Promotion of Electronic Warehouse Receipt Financing including warehouse accreditation
3. Revitalization of Agricultural Cooperatives
4. Set up escrow services to boost e-commerce
5. Installation of Cash Deposit Machines (CDMs) in commercial bank branches to reduce currency in circulation
6. Development of a virtual prepaid card solution at merchant outlets to encourage digital payments
7. Set up of a Private Equity fund to support fintech to develop solutions and use cases to help reduce currency-in-circulation and help farmers and SMEs access to financial services.

The Governor, SBP appreciated the initiatives and emphasized that active collaboration between SBP and PBA to promote financing to priority sectors is critical for ensuring sustained access of these sectors to financial services as well as fostering inclusive growth.

Zafar Masud, Chairman PBA stated that “these measures underscore PBA’s commitment to supporting key sectors of the economy and driving sustainable growth in Pakistan. By focusing on agriculture, SMEs, and digital & technology, we aim to create a more inclusive, resilient, and competitive banking industry that serves the needs of all stakeholders.”

The Finance Minister of Pakistan is overseeing these efforts himself as the initiatives have been identified on his advice.