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Bank credit to chosen few has distorted economy: CE

RECORDER REPORT

KARACHI: The Chief Executive, General Pervez Musharraf, has said that concentration of credit among selected few bank borrowers, large scale enterprises and that, too, in few cities, has led to the distortion of the economy.

He was addressing the heads of banks and financial institutions in the State Bank head office on Wednesday.

He said only 1.2 percent of the total borrowers got 60 percent of the bank credit, four percent got 83 percent, while the remaining 96 percent got 17 percent of total credit, disbursed by banks.

"Only five major cities take away more than 74 percent of banks' credit," the Chief Executive said.

He urged the banks to expand their lending base and extend credit to deserving small and medium enterprises.

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The CE said that a few hundred large borrowers were responsible for defaults of more than Rs 145 billion. "This situation cannot be allowed to continue. It is not in the interest of Pakistan," he added.

He said the banks, development finance institutions (DFIs), modarabas and leasing companies "have a focal role" to play. "A vibrant and prudent financial sector is a must for any country to grow," he observed.

He said although the banking sector had made a lot of progress, it, however, still "has a long way" to go. "We still need to be very innovative with our products and services, improve our risk management which is important, reduce our cost and continue to enhance the financial strength and capital ratio of all participants in the financial sector," he emphasised.

Musharraf observed that availability of credit to the farmers and small scale industries is very small. "These sectors could give employment but have no access to credit facility," he said.

In his address of welcome, SBP Governor Dr Ishrat Husain said that the economic team of the government was working hard to induct professional managers of irrefutable integrity to head the financial institutions.

He said the SBP also has a proposal to restructure the board of directors to place people of impeccable reputation.

Sindh Governor Azim Daudpota, Finance Minister Shaukat Aziz and Corps Commander Lt General Muzaffar Hussain Usmani were also present.

REMITTANCES

Gen Musharraf asked the banks to expedite delivery of home remittances and improve procedure for payments of utility bills by the general public.

He said during his visit to the Middle Eastern countries he was told that Pakistani banks take a lot of time to deliver the money to their families in Pakistan.

Referring to the "hundi" service, he said patriotic Pakistanis are willing to send their remittances through official channels if bank service was quick and efficient. "Even a single dollar you bring in as home remittances means that we do not have to borrow that dollar from external sources and go deeper into debt," he said.

UTILITY BILLS

About payment of utility bills by the general public, he said that he had raised the issue with the finance minister and SBP Governor as well.

"People have to stand in long queues, spend several hours of the day and take leave from their work and still face very rude and impolite behaviour from bank staff," he pointed out.

He said the number of bank branches accepting the utility bill payments are very small and in some cases people have to travel long distances to pay these bills.

"We should find sensible and easy ways of catering to the need of the public in paying their utility bills," he said and asked the banks to pay particicular attention to finding a solution to these problems.

Gen Musharraf asked the banking community to extend its full cooperation by stepping up its efforts in attracting new investment into the country.