Un­even bank credit dis­tri­bu­tion

The Pak Banker - - COMPANIES/BOSS - Staff Reporter

The vary­ing lev­els of eco­nomic de­vel­op­ment across the coun­try, skewed in­come dis­tri­bu­tion, and lack of enough banks` fo­cus on in­clu­sive fi­nance has led to an un­even ge­o­graph­i­cal pat­tern of credit dis­tri­bu­tion. The se­cu­rity sit­u­a­tion in some re­gions has made mat­ters worse. The new so­cio-eco­nomic re­al­i­ties are mak­ing dents in old de­mand and sup­ply pat­terns of bank fi­nance. `The need of the hour is to prompt banks to look at their lend­ing poli­cies and ad­just them to emerg­ing re­al­i­ties and op­por­tu­ni­ties,` says a for­mer deputy gov­er­nor of the State Bank of Pak­istan (SBP).

And, the fed­eral and pro­vin­cial gov­ern­ments and the SBP must also play their due role in mak­ing this hap­pen. `We can`t af­ford to con­tinue to de­lay the process of po­lit­i­cally, so­cially and en­vi­ron­men­tally bal­anced and sus­tain­able eco­nomic growth. Build­ing his ar­gu­ment he says, re­gard­less of bank­ing tech­ni­cal­i­ties in­volved in this mat­ter, KP is bound to feel ag­grieved if its share in out­stand­ing loans re­mains at 1.1pc whereas that of Is­lam­abad is at 8.5pc. `Sim­i­larly, what can you ex­pect from Balochis­tan, Fata, Gil­gitBaltistan and AJK ex­cept poverty and ig­no­rance-pro­duced is­sues of in­se­cu­rity if all of them com­bined get below 1pc of to­tal lend­ing.

Pop­u­la­tion census is long over­due and re­li­able data on de­tails, in­clud­ing po­ten­tial credit de­mand, of in­dus­trial and com­mer­cial en­ter­prises in provinces and fed­er­at­ing units is no­tavail­able. This makes it quite dif­fi­cult to as­cer­tain what fac­tors keep credit dis­tri­bu­tion very low in cer­tain re­gions. But go­ing by ge­o­graph­i­cal dis­tri­bu­tion data, we can see where bank credit has heav­ily con­cen­trated and where peo­ple or busi­nesses may be crav­ing for it (see ta­ble).

`Vari­a­tion in prov­ince-wise credit con­cen­tra­tion is quite nat­u­ral given the gaps be­tween the size and eco­nomic char­ac­ter­is­tics of pop­u­la­tion, in­come level and in­ten­sity of in­dus­trial and com­mer­cial ac­tiv­i­ties,` says head of one of the top five banks. But even af­ter fac­tor­ing in th­ese and other sim­i­lar fac­tors, should the vari­a­tions be ex­actly what that we see now? That`s the thing the SBP must probe and that `s some­thing banks should also look at to form a more in­formed view of the po­ten­tials and per­ils of fu­ture credit growth. SBP Gov­er­nor Ah­sraf Wathra re­cently told a busi­ness gath­er­ing in KP that the share of the prov­ince in bank credit was 1.13pc of the to­tal whereas its share in bank de­posits is 7.4pc. Ac­cord­ing to me­dia re­ports, he opined that in­se­cu­rity in KP in last 10 years had dented the emo­tions of traders and busi­ness­men and had made bankers more cau­tious (in lend­ing money there).

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