Risk Coverage Scheme for Small Farmers and Underserved Areas

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ACFID Circular No. 02 of 2025

Risk Coverage Scheme for Small Farmers and Underserved Areas

August 20, 2025

The Presidents / CEOs,

All Banks/Microfinance Banks.

Dear Sir/Madam,

Risk Coverage Scheme for Small Farmers and Underserved Areas

With a view to enhance financing to small and marginalized farmers as well as the farmers in unserved and underserved areas, the Government of Pakistan has introduced a risk coverage scheme for banks and MFBs against their fresh financing to small and marginalized farmers. The features of the scheme are as follows:

S#

Particulars

Key Features

Scope of the scheme

All production loans for crops and loans for dairy & livestock and fisheries provided during 01-Jul-25 to 30-Jun-28

Participating Financial Institutions (PFIs)

All Commercial Banks/Islamic Banks/Specialized Banks/MFBs

Eligibility Criteria

Following types of farmers are eligible: Punjab & Sindh: subsistence landholding/small farms KPK, Balochistan, AJK & GB: all types of landholding/farms

Loan size

Up to Rs3.0 million

Loan Tenor

Up to 12 months except for sugarcane where it is 18 months

Loan loss criteria (Risk Coverage Triggering)

The loan will be considered as loss in case the repayment of loan/installment is overdue by 12 months

Risk Coverage

Government will provide 10% first loss coverage on the outstanding agri loan portfolio against new borrowers and incremental outstanding portfolio against existing borrowers (principal amount only)

Submission of Risk Coverage Claims by Banks

Risk coverage claims will be lodged by banks electronically with Financial Inclusion Support Department (FISD), SBP BSC within 15 working days after completion of respective quarter.

Recoveries against Classified/ Loss Loans

Payment of risk coverage claim shall not obviate banks from the right of recovery of the defaulted amount. Banks shall continue with their regular procedure for recovery of loans. The recoveries from delinquent borrowers may be treated in three ways: A bank receives recovery from delinquent borrowers and it has pending subsidy claims with SBP under the scheme. In such scenario, the bank may adjust the recovered amount from the quarterly claims by netting it off from the risk coverage claims. A bank receives recovery from delinquent borrowers and it has no pending subsidy claims with SBP under the scheme. In such case, the concerned bank will deposit the recovered amount with FISD-SBP-BSC. FISD will adjust it with any other bank having pending risk coverage claims under intimation to Agriculture Credit & Financial Inclusion Department and Finance Division. In case where all the banks submit nil claims then the recovered amount will be deposited in a child account “Miscellaneous account (FG MISC)” under Central Account Non Food 1 on quarterly basis under intimation to Finance Division.

Incentive for banks to attract new borrowers

To meet the operational cost, Federal Government will pay Rs10,000 per new borrower to the bank to the extent of net increase in number of borrowers over the previous year. Banks shall evaluate their net increase in number of borrowers at end of each fiscal year and lodge the claims electronically with FISD, SBP BSC within 15 working days.

In view of foregoing, banks/MFBs are advised to ensure successful implementation of the scheme.

Yours sincerely,

Abid Qamar Director

Home — Circulars — ACFID Circular No. 02 of 2025

Risk Coverage Scheme for Small Farmers and Underserved Areas

August 20, 2025