The flaws of coercive sustainability
The new federal agricultural financing scheme, Zarkhez-e , is being touted by the authorities as a major government-backed intervention aimed at expanding collateral-free credit to small, subsistence farmers. However, many bankers insist that it risks becoming a repeat of the yellow cab scheme from the 1990s as it imposes “directed lending” on commercial banks in a weak legal and recovery environment. “It is a model that has repeatedly failed in Pakistan and sits uneasily with market principles the country has committed to adhere to under the IMF [International Monetary Fund] programme,” argued the head of retail banking at a mid-sized bank who requested anonymity. Zarkhez-e , also branded as Asaan Digital Zarai Qarza , aimed at expanding collateral-free agricultural lending for smallholders and tenants across the country, was launched by the State Bank (SBP) in October last year. Introduced under the National Subsistence Farmers Support Initiative, the project seeks to provide clean...