- Bank empowers farmers through innovative agri financing, promoting sustainability and uplifting Pakistan’s economy with transformative strategies
Interview with Sarfraz Hussain — Head Agri Credit Division, Bank of Punjab
PROFILE
Sarfraz Hussain is a seasoned banker with over 23 years proven track record of success and delivery. He carries with him diversified exposure in Agriculture, SME Banking and Credit Administration with leading commercial banks of Pakistan. He is currently associated with The Bank of Punjab (BOP) as Head Agri Credit Division for last 6 years. Holds M. Phil degree in Agri Economics from University of Agriculture, Faisalabad, Pakistan. There are several international and local trainings in his credit, covering different aspects of banking. He is also a certified trainer on the platform of National Institute of Banking and Finance (NIBAF), a training arm of State Bank of Pakistan. His accomplishments at bank testify to his acumen and expertise. BOP has been recognised as Best Bank for Agriculture at the Pakistan Banking Awards 2024. Following are excerpts from an exclusive interview with Sarfraz Hussain.
PAGE: BOP has been declared the best bank for lending to farmers. Please share the important benchmarks achieved.
Sarfraz Hussain: The Bank of Punjab (BOP) acknowledges the critical role of the farming community in sustaining Pakistan’s economy. Guided by a strategy centered on empowerment, innovation, and sustainability, BOP has taken transformative steps to redefine agricultural financing and uplift the livelihoods of farmers nationwide. Key benchmarks achieved include:
Best Agri Bank Recognition: BOP has been awarded the title of Best Agri Bank by Pakistan’s Banking Association (PBA) which is the most prestigious award in this sector in Pakistan. Additionally, BOP has also won of Best Agri Mid-Tier Bank for two consecutive fiscal years (2021–22 and 2022–23). Since it has now entered the league of large Agri Banks, it now ranks second amongst the large banks as per the State Bank of Pakistan’s Agriculture Scorecard.
Exponential growth: Over the last three years, BOP’s agricultural portfolio has increased manifold, from PKR14.93 billion to PKR43.70 billion. Additionally, the Non-Performing Loans (NPLs) also stand at a very low level, below 5% as of December 31, 2023 (far lesser than the industry/competition).
Pioneering initiatives: As the pioneer of the Kissan Card Project, BOP has enhanced financial accessibility for a huge chunk of small/ subsistence farmers – which is perhaps the overlooked portion of the farming population due to lack of organised documentation, business model, socio-economic conditions etc. This program enables them to benefit from digital and subsidised solutions which has been launched by BOP; the Govt. of Punjab. The program, which is an end to end digital system based on a structured transaction through Cards to be used at specified POS machines (vendors), aims to disburse PKR75 billion to more than 500,000 farmers for the ongoing Rabbi season. The prescribed innovation took place by integrating PLRA, PITB and PMD systems into BOP’s system enabling smooth sailing of the project.
Additionally, BOP has developed a “Livestock Card” addressing the small farmers of Non-Farm segment. The project aims to facilitate an estimated around 400,000 farmers with a limit of PKR27,000/ animal. The project aims to disburse a total of PKR11.00 billion.
Global recognition: BOP won the prestigious Gates Foundation's Digital Agri Challenge Fund through Karandaaz, affirming its innovative approach to agricultural finance. The challenge fund won by BOP was contested by several other banks/FIs in partnership with Fintechs/ Agtechs. BOP has been allotted a grant of PKR50.00 million through the project which aims to develop an end-to-end digital lending platform targeting the small/ subsistence farmers. The maximum loan amount to an individual farmer is PKR1.00 million which will be extended to both the Farm (Crop Production) as well as Non-Farm (Dairy & Livestock Only). The Bank will integrate its system with Punjab Land Record Authority (PLRA) for this purpose which will verify a borrower’s land for the crop loans.
Electronic warehouse receipt financing: BOP is pioneer bank in introducing EWRF in the industry. This feat is achieved by only 2 banks at the overall industry level, even today. Introduced financing programs under conventional, Islamic, and government schemes, revolutionizing post-harvest financing. BOP has disbursed PKR1.28 billion in this area of financing against major commodities i.e. Paddy and Maize.
Adoption of new insurance method for risk mitigation: Launched the Area Yield Index Insurance to safeguard farmers against production risks. This project, which was launched as a pilot, was also pioneered by BOP and one other Bank in the industry. The payout to the farmers against their crop yields was exemplary.
Area Yield Index Insurance (AYII) protects farmers against yield losses due to various factors like adverse weather or pests. An Area Yield Index Insurance (AYII) is an insurance cover that insures farmers against a pre-set historical benchmark. The perils covered in this product are windstorm, frost, excessive rainfall, heat wave, hail, flood, drought, pest and diseases. AYII index insurance primarily covers natural calamities or other factors causing yield reductions in the area.
Commitment to inclusion; non-financial advisory services: Through a relentless focus on innovation, financial inclusion, and sustainability, BOP continues to empower farmers and strengthen Pakistan’s agricultural sector. BOP has also embraced the Agri Finance Literacy Program (AFLP) introduced by SBP through which it conducted around 600 awareness sessions since the program’s inception, all over the country. The awareness sessions also paved way for female farmer inclusion. Due to female inclusion focus, BOP has also won the women inclusion award by PBA (which is also a prestigious award).
Tech-enabled advisory services: Partnered with reputed AgriTech firms to offer non-financial advisory services, equipping farmers with essential knowledge and tools for improved productivity. The on-boarding of Agritechs took place through PPRA as well as MOUs/ Agreements. Reputed names in the Agritech industry are included in this list. BOP is currently engaged in providing advisory services to its customers of farm loans i.e. crop Production; Tractors etc. BOP’s comprehensive and forward-looking approach underscores its dedication to being the preferred partner for farmers and a catalyst for agricultural transformation across Pakistan.
PAGE: How has BOP achieved these benchmarks, whereas some larger banks have not?
Sarfraz Hussain: The Bank of Punjab (BOP) has achieved its benchmarks through a strategic approach that prioritizes innovation, inclusivity, and technological advancement in agricultural finance. Key factors contributing to BOP’s success include:
Board level commitment: Agri financing is close to the heart of BOP’s Board. This puts special emphasis on the level of commitment towards this industry. BOP’s senior management is keen to implement the Bank’s strategy formulated to expand agri financing through inclusion, diversity and digitalisation.
Creation of agri hubs: The Agri Credit Division (ACD) of BOP expanded its foot print beyond the borders of Punjab and is now present in all the provinces of Pakistan. Similarly, specific hubs were created through which Agri field officers were hired to expand the team presence in all areas thereby ensuring portfolio growth. ACD is currently managed through the field by a division of 11 regions, 36 hubs and more than 200 Agri designated branches. Each region has a Regional Head supported by a Regional Credit analyst.
Program lending approach: The Bank of Punjab (BOP) has strategically divided its network into Rural and Urban regions to tailor its offerings to specific customer needs. In rural areas, BOP prioritizes agriculture-based customers, providing a comprehensive suite of Farm and Non-Farm products. This includes financing for essential areas like crop inputs, farm machinery, Dairy/ livestock, fisheries, food processing, and sustainable energy solutions. BOP finances all these sectors under program based lending duly approved by the Bank management.
Delegation matrix:
In order to address the Bank’s processing challenges, BOP simplified the approval processing of Agri Loans and delegated powers of approval to the Business Unit, thereby, creating a dedicated Credit Factory within the Business Unit by the name of CIU (Credit Initiation Unit) who look after the business risk and ensure compliance to the regulator and bank’s policy etc.
By adopting this multifaceted approach, BOP has successfully outperformed larger banks and established itself as a leader in agricultural finance, driving growth, innovation, and inclusivity in Pakistan’s agricultural sector.
PAGE: What is the amount and share of Inputs/ development/ warehouse construction/ livestock/ aqua culture in the total lending to farmers?
Sarfraz Hussain: Input loans: PKR18.58 billion
Development: PKR4.98 billion
Livestock/aquaculture: PKR14.244 billion
FFSAP+EWRF: PKR0.367 billion
PAGE: BOP has also extended loans to fishermen which were the major products financed and what is the total quantum of loans extended in FY24?
Sarfraz Hussain: Overall financing and trade business extended to Aquaculture including fishermen during the year remained PKR 3 billion approximately.
PAGE: BOP is also involved in EWR financing, what was the quantum of financing in FY24?
Sarfraz Hussain: By spearheading Electronic Warehouse Receipt (EWR) financing, BOP has revolutionised agricultural financing in Pakistan. The bank has significantly expanded its EWR financing portfolio beyond the pilot phase, incorporating a diverse range of commodities such as maize, rice/ paddy, and wheat. Through this initiative, BOP has enabled farmers and businesses across various regions to unlock the value of their agricultural assets, promoting sectoral growth and financial empowerment. EWRF significantly addresses the country’s issue of Food Security, postharvest crop losses and compensation to farmers for the sale of their crops in the peak time. In FY24, BOP disbursed PKR1.28 billion under EWR financing.
PAGE: What is the lending target of lending to farmers for FY25?
Sarfraz Hussain: After being named Best Agriculture Bank of the Year 2024, BOP is poised to further its leadership in agricultural financing. The bank remains dedicated to enhancing financial inclusion, delivering innovative solutions, and transforming the agricultural sector. For FY25, BOP has set an ambitious lending target of PKRs110 billion to support the growth and prosperity of farmers across Pakistan.
PAGE: Which new areas BOP intend to explore in FY25?
Sarfraz Hussain: BOP is focused on digital innovation in agriculture financing to provide quick and efficient online loan solutions for farmers, improving accessibility, transparency, and the overall borrowing experience.
Key areas of exploration include:
Launching the Digital Grower Loan.
Digitizing non-farm sectors lending.
Offering bundled non-financial advisory services alongside farm sector financing.
Partnering with agribusiness corporates for dairy/ Livestock / Crop Production/ Agri machinery to enhance financial inclusion through a close loop value chain model.
PAGE: What is the recovery percentage/ bad loans?
Sarfraz Hussain: BOP has maintained an impressive recovery rate of 97%, with bad loans accounting for less than 3% of the portfolio, reflecting its strong risk management and borrower engagement strategies.
PAGE: Does BOP go for credit insurance?
Sarfraz Hussain: BOP currently does not go for credit insurance. This is in line with the industry practice in Pakistan where credit insurance does not prevail. Additionally, we believe that the local insurance industry is not offering any such credit solutions. However, BOP has insurance arrangements in place for Livestock and Dairy Animals, Agri Machinery and Tractors, along with crop loan Insurance for Crop Production loans. Moreover, BOP offers comprehensive insurance coverage for all its agricultural products. This includes life insurance of its clients pertaining to digital lending.