The federal government has introduced a new risk coverage scheme to encourage banks and microfinance institutions to expand financing for small and marginalized farmers, particularly in unserved and underserved areas.
Under the initiative, banks will receive Rs10000 per new borrower, based on their net increase in clients compared to the previous year. The State Bank of Pakistan (SBP) announced that all commercial banks, Islamic banks, specialized banks, and microfinance banks are eligible to participate in the scheme, which will remain valid until June 2028.
The risk coverage scheme offers 10% first-loss coverage on the outstanding agricultural loan portfolio for new borrowers, as well as on the incremental loan portfolio for existing clients. Borrowers can access up to Rs3 million in loans for a maximum tenure of 12 months, except for sugarcane-related financing, which allows up to 18 months.
Banks will continue to recover defaulted loans through their regular procedures. However, if recoveries are made while subsidy claims are pending, the recovered amount may be adjusted against quarterly submissions under the scheme.
The SBP has directed banks to evaluate their annual borrower growth and submit claims electronically to the Financial Inclusion Support Department (FISD) of SBP BSC within 15 working days after the close of each fiscal year.
With this measure, the government aims to reduce financing barriers in agriculture, improve access to credit, and support Pakistan’s farming communities with sustainable growth opportunities.