State Bank of Pakistan (SBP) Governor Ashraf Mahmood Wathra. PHOTO: FILE
He was speaking at an event tilted “Credit expansion in Khyber-Pakhtunkhwa” organised by the SBP on Monday.
It was attended by representatives of banks and members of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and Khyber-Pakhtunkhwa Chamber of Commerce and Industry (KPCCI).
“K-P is an important part of the country’s financial set-up, its share in total deposits is 7.4% while the share in loans is only 1.13%,” the governor said, adding the last 10 years of insecurity had severely dented the emotions of traders and businessmen in the province and had also made bankers more cautious. On the other hand, due to the dearth of large-scale manufacturing industry and demand for finance, banks had expressed very little interest, he said.
The 7.4% deposit figure caught KPCCI members by surprise as earlier they believed that the deposit ratio was 36% while lending was less than 1%.
The central bank governor pointed out that in the past there was also not a high demand for borrowing, but now conditions had improved and banks would bring funding to the province.
KPCCI President Zulfiqar Ali Khan said banks had declared K-P as a red zone and no lending was being made. “Banks are not interested in giving loans because they have made the procedure tough for the traders,” he said.
“It is not just the situation in the last 10 years, but K-P has suffered for the last 40 years due to poor infrastructure and the presence of Afghan refugees and internally displaced persons.”
However, the chairman of the association of banks stressed that it was only a misconception that banks had declared K-P as a red zone. “Conditions are now getting better and all banks are ready to invest here.”
The SBP governor told the audience that an agricultural credit committee was being formed to provide loans, which would comprise members of commercial banks.
Livestock and crop loan insurance schemes as well as interest-free loans for solar tube wells will be offered. The loan scheme is in final stages which will provide financing for some 30,000 solar tube wells.
The governor added that Kisan credit schemes would also be initiated in the province whereas warehouse seed financing and the agricultural value chain would be given more importance.
Talking about subsidies, Wathra said these were usually offered in collaboration with the federal government, but the SBP was ready to initiate such schemes in association with the provincial government.
Published in The Express Tribune, March 8th, 2016.
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