ISLAMABAD, Nov 10 (ABC): The government has intensified efforts to improve farmers’ access to agricultural credit through digital lending, targeted financing, crop insurance and simplified land verification. These measures aim to expand formal financing for small farmers while reducing lending risks for banks.
According to official documents available with Wealth Pakistan, the State Bank of Pakistan (SBP) has introduced several initiatives in coordination with federal and provincial governments. These include collateral-free digital loans, warehouse receipt financing, digital land records, climate-smart financing and risk-sharing arrangements.
A major initiative is Zarkheze – Asaan Digital Qarza, launched on October 14, 2025, to provide collateral-free crop financing to small and subsistence farmers. The scheme offers loans of up to Rs1 million to eligible landowners and Rs500,000 to tenants, with repayment required within 12 months.
To ensure that farmers use the financing for agricultural purposes, the scheme provides 75% of the loan in kind through a verified agricultural merchant network. Farmers can use this amount to purchase essential inputs, while the remaining 25% is available in cash.
Under the Prime Minister’s Youth Business and Agriculture Loan Scheme, the government allocated Rs65 billion to 21 banks for agricultural financing during FY2025-26. By June 30, 2026, banks had disbursed Rs63.46 billion, achieving approximately 97.6% of the assigned amount.
Warehouse financing and digital land records improve credit access
The Electronic Warehouse Receipt Financing facility has emerged as another channel for agricultural lending. It allows farmers and commodity traders to obtain bank financing against produce stored in accredited warehouses, providing an alternative to conventional collateral requirements.
Initially introduced for maize and rice, the facility was later expanded to include wheat. Since its introduction in February 2022, it has facilitated more than Rs15 billion in financing. During FY2025-26 alone, banks disbursed Rs5 billion to 864 borrowers under the mechanism.
Meanwhile, the government is promoting digital land records to simplify ownership verification and accelerate agricultural loan processing. In Punjab, 30 banks have been integrated with the Punjab Land Records Authority’s system, enabling them to access digitised land information.
During July 2025–June 2026, the system generated 143,583 land ownership documents, known as fards, and created 43,786 charges. These digital services help banks verify ownership and process agricultural financing applications more efficiently.
The SBP also advised banks to integrate their agricultural lending branches with the authority’s system by October 2026. Additionally, the authority introduced the Green Property Certificate through its Land Management Portal in June 2026, while integration with banking systems remains underway.
Crop insurance expanded to protect farmers against losses
The government has also strengthened agricultural insurance through the revised Crop Loan Insurance Scheme Plus, launched on April 20, 2026. The initiative aims to provide greater financial protection to farmers against crop losses and natural disasters.
The revised scheme expanded insurance coverage by including potatoes among the notified crops. It also introduced technology-based assessments of natural calamities through the Space and Upper Atmosphere Research Commission (SUPARCO) and established a co-insurance consortium to strengthen claim-paying capacity.
Under the revised arrangements, male farmers can receive one-time income-loss support of Rs15,000, while female farmers are eligible for Rs17,500. Personal accident coverage has also increased to Rs250,000 for male farmers and Rs275,000 for female farmers.
The federal government bears insurance premium costs for eligible borrowers under the relevant crop and livestock insurance arrangements. During FY2025-26, the Ministry of Finance reimbursed Rs1 billion in premium claims under the Crop Loan Insurance Scheme and Rs140 million under the Livestock Insurance Scheme for Borrowers.
Climate-smart financing and risk coverage encourage agricultural lending
Climate-smart agricultural financing has become another policy priority as the government seeks to strengthen the agricultural sector’s resilience to environmental risks.
The SBP has engaged the Alliance for Financial Inclusion for technical assistance under an initiative launched in 2025. The programme covers climate-smart farming practices, climate-risk profiling, green banking guidelines and capacity building for financial institutions.
These measures aim to help banks incorporate climate-related risks into agricultural lending decisions while supporting farmers’ adoption of more sustainable practices.
To further encourage lending, the SBP has introduced a Risk Coverage Scheme for Small Farmers and Underserved Areas. The scheme provides banks with first-loss risk coverage of up to 10% for loans extended to small farmers in Punjab and Sindh and to all farmers in other provinces.
Additionally, banks can receive a subsidy of Rs10,000 per borrower, linked to the net annual increase in their agricultural borrowers. This incentive aims to offset the cost of bringing new farmers into the formal banking system.
The risk coverage facility will remain effective for three years, from FY2025-26 to FY2027-28.
Together, these initiatives reflect a broader shift towards diversified agricultural financing. By combining digital lending, alternative collateral, crop insurance, climate-risk management and financial incentives, the government aims to improve credit access for underserved farmers and strengthen agricultural productivity.
