Wathra urges banks to accelerate pace of credit expansion in KP

Governor State Bank of Pakistan (SBP) Ashraf Mahmood Wathra on Monday urged the commercial banks to accelerate pace of their credit expansion and trade facilitation activities keeping in view the changing business environment in Khyber Pakhtunkhwa.
He was speaking at a session held here on the topic of "Credit Expansion in KPK" with presidents and chief executives of commercial banks, representatives of chambers of commerce and industry and Federation of Pakistan Chamber of Commerce and Industry (FPCCI).
Expressing his optimism that the ratio of public access to financial services will grow in the wake of much improved security situation in KPK, the SBP governor asked the businessmen to ensure pre-requisite, including documentation, financial disclosure and source of income for having easy access to banking finance. Admitting that the ratio of lending by commercial banks was still very low in the province, he said that though the borrowing demand has increased during last one-and-a-half year due to improved security situation in the KPK, the ratio of lending by commercial banks was still below two per cent as against the deposit rate of 7.4pc in the province.
He said the banking industry advances to deposit ratio (ADR) is around 48pct but it needed to be improved for development of private sector. Pointing out that the ADR ratio in KPK was only 7.4pc and less than the banking industry's ADR, he said that efforts are required to cope up with the situation so as to lessen the funding gap before the execution of projects, relating to China-Pakistan Economic Corridor (CPEC).
He hoped that the larger as well as Small Medium Enterprises (SMEs) industry would grow with the advent of the CPEC, thereby generating business and industrial activities in the region.
The SPB governor said the financing ratio remained very low to Mirco SMEs and Agriculture sectors due to unfavourable conditions in KPK. However, he said the SBP took several initiatives for development small businesses, under which the access to loans has increased for the province and other underserved areas. He said the share of KPP in credit disbursement in the agriculture sector to ensure maximum provision of loans to low-income farmers has grown up by 7.6pc as compared to 6.5pc, recorded in 2015-16. He said a sub-committee of Agriculture Credit Advisory Committee has been set up for KPK and other underserved areas of the province, besides the SBP has introduced credit and refinancing scheme for the marble industry of the province. Governor said Large Scale Manufacturing (LSM) had tremendously grown up in last two quarters, while CBI remained almost lowest during last five years.
He said foreign change reserves have improved in the country while exchange by and large has also improved during last couple of years. He said the good news was that the private sector's payment growth has increased, whereas long-term loans have also swelled. He said banking industry is playing a vital role in stabilising and improving the country's economy.
He said that micro finance industry has rapidly grown in the country, besides a credit guarantee scheme has also been introduced with the support of UK Department for International Development (DFID) for small businesses in rural areas of the province.
He also informed that the SBP has initiated a training and capacity building programme in collaboration with Small and Medium Enterprises Development Authority (Smeda) to conduct special training session for officials of banks.
Speaking on the occasion, Khyber Pakhtunkwha Chamber of Commerce and Industry's president Zulfiqar Ali Khan complained about the low lending ratio of commercial banks against their swelling deposits from KP. He said the commercial banks had declared KP as red-zone and as a result of which business community was facing problems in having access to loans on easy terms and conditions from the banks.
The KPCCI chief urged the SPB governor and commercial banks to extend their full cooperation to the business community keeping in view the security challenges being faced by them in the province. He also complained that the commercial banks were using delaying tactics in clearing documents and other required papers for opening accounts. He suggested the reactivation of joint committee, which was constituted by former SBP governor to resolve the issues of the business community. He also urged the SBP to exclude KPK from negative list. Former president of FPCCI Faud Ishaq and other representatives also spoke on the occasion.