Islamabad – In a bid to strengthen the agriculture sector and improve financial access for small and marginalised farmers, the Government of Pakistan has rolled out a risk coverage scheme for banks and microfinance institutions (MFBs).
The initiative aims to reduce lending risks for financial institutions, particularly in underserved regions, and encourage the extension of loans to farmers. The scheme is open to all commercial banks, Islamic banks, specialised banks, and MFBs, covering production loans for crops, dairy, livestock, and fisheries.
Loans of up to PKR 3 million will be available between July 1, 2025, and June 30, 2028. Repayment terms will extend up to 12 months, except for sugarcane loans, which will allow up to 18 months. Any loan overdue by more than 12 months will be classified as a loss.
To support lending institutions, the government will provide 10% first-loss coverage on the outstanding agricultural loan portfolio, applicable to both new and existing borrowers. Banks will be required to submit claims for risk coverage electronically within 15 working days after each quarter, without restricting them from pursuing recovery from defaulters. Recoveries made from delinquent borrowers may be adjusted against pending claims.
Additionally, the federal government will cover operational costs by offering PKR 10,000 per new borrower to banks, calculated on the net increase in borrowers compared to the previous year.
According to the State Bank of Pakistan (SBP), the scheme seeks to expand financing for small-scale farmers, particularly in rural areas with limited access to formal credit, while also promoting broader financial inclusion. It will target subsistence farmers in Punjab and Sindh, as well as all types of landholding farms in Khyber Pakhtunkhwa, Balochistan, Azad Jammu and Kashmir, and Gilgit-Baltistan.
The SBP has urged all banks and MFBs to implement the scheme effectively to ensure enhanced access to agricultural credit and contribute to the sector’s overall growth.
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