Transforming ADBP into ZTBL and its performance
A.K. Sial

The decision of transforming Agriculture Development Bank of Pakistan (ADBP) to Zarai Taraqiati Bank Limited (ZTBL) has invigorated the expectations of the growers towards the bank as they perceive that this step has been taken to introduce revolutionary changes in the bank and all the bottlenecks in smooth supply of agriculture credit and other problems associated with the bank would be removed forthwith. 

There is a common impression amongst the farming community that the bank management is completely overhauling the ZTBL and assembling it in conformity with the needs of farm sector. Since past several years farmers have been frequently expressing resentment over various bank policies in different forums and now time will tell whether drastic changes in the bank structure will benefit the agriculture sector of the economy or it will end up in nothing more than a new name. 

However, one cannot deny the fact that ADBP, presently ZTBL, the single largest provider of agriculture credit to the growers has gone a long way in agriculture growth of the country and bringing in green revolution. But at the same time the bank cannot be left inexplicable for the stagnation in agriculture growth during the past few years and deterioration in living conditions of the growers. 

Charging highest mark up rate from the common growers as compared to any other institution, harsh and ruthless recoveries without considering natural calamities, drought or floods, and over protection to unscrupulous officials has been the hallmark of ADBP for the last one decade. 

A well reputed banker, after assuming charge of ADBP Chairmanship couple of years earlier, conducted thorough investigation into the affairs of the bank and chalked out a strategy to restructure and strengthen the bank aiming at higher agriculture growth. Eradication of corruption from the institution, improvement in its financial health and transforming it into a beneficial organisation for the growers were the major components of his agenda for change. 

Stagnation in production of most of the cash crops and rampant poverty in small land holders is no more a secret for the economic planners as all the studies of local and foreign agencies have made revelation about declining quality of life in rural economy which is mostly dependent on farm income. 

Bank's management has been proclaiming several success stories but the financial condition of the farmers is deteriorating day by day. Agricultural production has become slowed down since last three years and no notable improvement has been witnesses in use of latest technology in production process. 

During past three years new management has increased disbursement of loans to the growers but the average production remains stagnant. No notable improvement has been witnessed in the production of major crops. After achieving record output of over 21 million tonnes in 2000 (fiscal year 1999-2000) wheat production is continuously decreasing. 

Cotton crop has also failed to show any reasonable improvement in production. Rice output is also fluctuating on the patterns of cotton. Only sugarcane crop has shown a little improvement during past two years as far as production is concerned. The situation of minor crops is not very much different. 

There were multifarious reasons behind slow down in farm sector and policies of ADBP were amongst these factors. Others being drought, high cost of production due to ever increasing prices of inputs and bad market management of the farm out puts. 

Table-1 depicts disbursement and recovery position of ZTBL during the past seven years.  According to the bank sources during the year 1995-96 the disbursement of ADBP loans was Rs10.34 billion which increased to 11.69 billion in 1996-97, in 1997-98 the disbursement jumped to Rs22.69 billion which is almost double the amount advanced during the preceding year. 

In year 1998-99 disbursement further rose to unprecedented level of Rs30.18 billion rupees but suddenly dropped to Rs24.42 billion during 1999-2000 and the target has been fixed at Rs35 billion for the fiscal 2002-2003. 

Despite higher disbursement of agriculture loans the off-take of fertilisers and production, of tractors and other agricultural implements have not shown any reasonable improvement to prove the real disbursement of loans. According to the State Bank of Pakistan latest report the off-take of fertilisers increased by 9.7 per cent in fiscal 1999-2000 compared to the previous year and 4.7 per cent during 2000-2001 while during the year 2001-2002 it showed a negative growth of minus 9.1 per cent. The report suggests that the production and sale of Tractors remains stagnant during fiscal 2000-01 and 2001-02. 

This is a serious question that if the additional amount of loans disbursed to the growers has not been utilised by farmers for the purchase of fertilisers and tractors, which are the major components of investments, where additional funds to the tune of billions of rupees are missing. If the bank's loan disbursement has been increased without any reasonable improvement in the production there must be something wrong with the system of the bank. 

The other issue the bank is facing is portfolio of non-performing loans. Although the recovery performance of ZTBL is better than other government sector banks yet non-performing loans are always problem for the management. But despite that this is the only bank in Pakistan hesitating to introduce any scheme to attract recovery of old loans even the State Bank of Pakistan has directed all the banks to facilitate recovery of old stuck-up loans against payment in discounted terms. 

It is high time that the government intervene into the affairs of Zarai Taraqiati Bank and consider reduction in mark-up rate. At present the bank is charging around 14 per cent mark-up from the growers and in case of late payment it puts additional burden of 3 per cent totalling to 17 per cent. 

This act of the bank against this least earning segment of society in a situation when private banks are advancing loans for automobiles and households charging just 11 per cent mark-up.  The Chief Minister Punjab has already announced reduction in mark-up on loans to be issued from Punjab Provincial Cooperative Bank and the Bank of Pakistan. 

Table-1:  (Billion Rupees) 

Table-2: The performance of agriculture sector from 1995-96 to 2001-02