SECP proposes national spot market to improve farmers’ access to finance

The Securities and Exchange Commission of Pakistan (SECP) has proposed the creation of a national agricultural spot market to enhance farmers' access to financial resources. SECP Chairman Dr Kabir Ahmed Sidhu announced this initiative during his address at the Pakistan Institute of Development Economics' international conference, "Mission 100 Billion Dollars".

The proposed digital platform aims to streamline agricultural trade by integrating standardized grading, transparent bidding, and electronic warehouse receipts. Provincial authorities will maintain regulatory control over agricultural markets, while the SECP will develop the necessary technological infrastructure.

Agriculture accounts for 23.44% of Pakistan's gross domestic product, with crops valued at approximately Rs8.8 trillion. The proposal highlights the importance of improving storage, handling, and marketing infrastructure to mitigate post-harvest losses, which range between 20% and 40%, resulting in a loss of around Rs88 billion per percentage point. By modernizing storage facilities and distribution networks, the SECP hopes to preserve significant economic value and boost farmers' earnings.

Currently, approved storage capacity stands at around 326,000 metric tonnes, while annual production of dry agricultural commodities amounts to approximately 55.7 million metric tonnes. To address this imbalance, the SECP proposes the establishment of modern warehouses, cold storage facilities, and efficient supply chains to reduce wastage and enhance market access for farmers.

Under the proposed framework, electronic warehouse receipts would allow farmers to obtain bank financing against stored produce, providing them with greater flexibility in choosing when to market their crops.

The SECP initially plans to include wheat, rice, maize, cotton, and sugar in the new spot market, supported by standardized quality grades. Uniform requirements for weight, quality assessment, and grading, coupled with transparent bidding, could improve price discovery and enable farmers to secure more competitive prices. Additionally, the SECP plans to register traders and commission agents, maintain digital records of transactions and stocks, and ensure timely payments to bolster accountability and protect farmers and buyers.

To further strengthen the agricultural market, the SECP calls for the modernization of market regulations, licensing arrangements, fees, and procedures governing commodity movement. Separately, Sidhu outlined the SECP's broader capital market reform agenda, aiming to increase the number of stock market investors to 2.5 million. The commission intends to launch a financial awareness campaign to encourage young people to participate in capital markets, emphasizing the importance of financial literacy in helping prospective investors make informed decisions.

Sidhu also highlighted the need to strengthen audit oversight, advocating for a separate, independent legal framework to ensure reliable financial reporting and investor protection.