FAO Regional Office for Asia and the Pacific

Pakistan

CASE 19: The empowerment of small farmers (Kissan) through digital and financial inclusion (e-credit) in Punjab Province

Smallholder farmers in Pakistan traditionally have very little access to formal credit and the cost of credit from informal sources is often very high, increasing production costs. To address these issues, in 2016, the Government of Punjab Province initiated a programme of empowerment of Kissan through digital and financial inclusion (e-credit scheme) to provide smallholder farmers in Punjab with interest-free crop finance. It aims to help farmers grow a bumper crop, sell their produce at reasonable prices, increase their digital literacy and improve overall financial inclusion. The programme targets under-banked and non-banked farmers in Punjab to attract them to formal banking made accessible through mobile wallets. Farmers are entitled to an e-credit scheme for five years using subsidized smart phones provided by the government.

Two commercial banks and three microfinance institutions provide small farmers with interest free loans using mobile money platforms. Under the programme’s loan subsidy component the provincial government established a revolving fund of Rs 2 billion for Akhuwat Islamic Microfinance and other finance institutions who provide credit lines from their own resources. The Punjab Land Revenue Authority registers farmers in the programme. Interest free loans amount to Rs 30 000 per acre for rabi crop and Rs 40 000 per acre for kharif crop. Owner or tenant farmers with holdings under 12.5 acres are eligible for interest free finance for up to five acres of land. During 2019-20 Rs 600 million were allocated from the scheme.

Partners such as Telenor and Tameer Microfinance Bank distribute free smart phones to farmers approved for participation. The smart phones have digital wallets providing easy access to financial services and simplifying loan applications and payments. The phones are also pre-installed with useful agriculture-related apps. From these, farmers can access real time weather updates, pesticide warnings, crop calendars, best crop practices and expert advice. The apps were developed as a public/private partnership under which the private sector delivers technical development, app installation and maintenance and training for farmers, while the Department of Agriculture provides agriculture-related data and expert advisory services.

“The smart phones have digital wallets providing easy access to financial services and simplifying loan applications and payments. The phones are also pre-installed with useful agriculture-related apps. From these, farmers can access real time weather updates, pesticide warnings, crop calendars, best crop practices and expert advice.”

Since the programme started almost five years ago 471 000 smallholder farmers in Punjab have registered and a total of 917 000 loans were disbursed to them amounting to Rs 61.99 billion. The credit has been leveraged through government investment of Rs 5.5 billion, including Rs 2 billion for a revolving fund given to Akhuwat Islamic Microfinance. The provincial government and private partners like Telenor are providing more than 125 000 smart phones loaded with agricultural apps, with subsidized usage places to participating farmers.

The programme is currently under review for the first five-year phase to evaluate its impacts on farmers’ income, security and mobile and financial literacy.