In a recent visit to Washington, DC, notable meetings took place with members of the Diaspora, po-litical, think tank and developmental arena. Premier among them, were a series of meetings with Non-Resident Pakistanis (NRPs). The NRPs, headed by ex-banker Shahab Qarni, have a grand vision to assist Pakistan. Towards the realization of this vision, they have been coordinating with myriad partners in Pakistan including the SIFC and University of Agriculture (Faisalabad). In subsequent arti-cles, I will elaborate on the array of discussions and also into the breadth of NRPs ongoing and pro-posed projects, but for the sake of brevity, this article will focus on the ambition to set up a Kissan Micro Finance Bank (KMFB) in Pakistan.
Before getting into the whys and hows of KMFB, let’s briefly consider the importance of NRPs to Pakistan. It would not be a stretch to state that they are one of the reasons that Pakistan is eco-nomically surviving. Admittedly, this is a tall claim, but let me prove to you that it is not a far-fetched claim. Consider this: Pakistan’s imports are worth $63 billion and exports are $39 billion, a deficit of $24 billion. Additionally, Pakistan’s debt obligation is reported to be $10 billion in 2024.
The two combined generate a shortfall of $34 billion per year. Where does this money coming from? Certainly, not through the much-hyped FDI (amounting typically to pittances) or IMF (not more than a couple of billions). A substantial, indeed the largest, chunk of the hard currency that Pakistan needs is coming from the nine million Pakistanis who remit approximately $30 billion per year to the nation, which in turn helps to pay for our FE deficits. It should be noted that $30 billion is the amount coming through the official banking channels. The unofficial remittances are cited to be in excess of $10 billion as well. By sending $40 billion to Pakistan every year, the overseas Pakistanis are arguably the unsung heroes of Pakistan!
Having shown that the NRPs are among the saviours of Pakistan, let us now delve into how Pakistan can save itself. In a previous article, “Vision 2035: Adding $100 billion to the GDP”, I had argued that Pakistan needs to rely on itself for its economic revival, rather than chasing FDIs and bailouts. And that can only happen if we focus on generating income through creation of new sectors and expand-ing existing sectors. One sector that should be of paramount interest is agriculture. Agriculture con-tributes 23% to the GDP, and employs almost 40 percent of our labour force, including roughly 60% of the women labour force.
Additionally, 90 percent of Pakistan’s farmers are small farmers who own between 6 – 8 acres of land and are living below sustenance level because the value of their yield is not enough for them to thrive. Consequently, despite being a predominantly agrarian society, roughly 50 percent of Pakistan’s families are food insecure, 40% of the children are stunted, and there is massive malnutrition. Hence to make our nation food sufficient and healthy, and to bring economic uplift to approximately half of the population that is dependent on agriculture, Pakistan needs to introduce innovation in its agro processing sector.
The importance of agriculture sector has been realized by many powers-than-be in Pakistan, but their focus has typically been on bringing higher productivity in the traditional crops; wheat, cotton, rice, sugarcane, etc. The area that is continuously ignored is horticulture and particularly the post-harvest losses of 40% in. By some calculations this wastage is equivalent to $5-7 billion in raw pro-duce, and could be turned into $30 billion in value added processed food. Most importantly, this value addition should take place at the farmer level where 90% of our small farmers exist. This will primarily require access to finance for the small farmers. And herein lies the need for a “Kissan Mi-cro-Finance Bank”.
The preceding argument shows that a KMFB is a crucial need of the time. Sure, there are already microfinance banks and micro finance institutions in Pakistan, including the historic Agricultural De-velopment Bank of Pakistan. Depending on who is categorizing, it is estimated that Pakistan has be-tween 40-50 micro finance institutions. The penetration of the MFIs in Pakistan is very low reaching around 4% of the total market (SBP report). For comparison, Bangladesh has 700 plus MFIs serving 40 million members. Additionally, the MFIs do not serve the need of the small farmer where it really matters; helping them to become value added farmers and entrepreneurs.
That is where KMFB will be unique. It will focus on not simply acting as a financing facility for the farmers, but also assisting in the creation of a $30 billion food processing sector through creating a value chain which will focus at the grass root farmer, rather than the large land-holders or the Nestles and Mitchels of Pakistan. KMFB will accomplish this by partnering with expert academic institutions, providing targeted mi-croloans, offering specialized saving products, imparting financial literacy and education, providing crop, livestock and health insurance, providing cooperative financing, mobile banking, and most critically, providing support to create a robust agriculture value chain which will encompass produc-tion, processing, storage, and marketing.
If the vision of the KMFB is realized, it would change the economic trajectory of Pakistan by provid-ing economic uplift not only to Pakistan, but also to the more than half of the population of Pakistan that relies on agriculture as their bread and butter!
—The writer is a former Senior Advisor to the Government and a sector development specialist. He is also a promoter of Pakistan and its Buddhist heritage.
