Banks play their part but remain shy of innovation


Banks play their part but remain shy of innovation

THE State Bank of Pakistan (SBP) is pushing banks quite aggressively to keep doing what is required of them to help Pakistan achieve the SDGs. Conventional and Islamic banks as well as microfinance institutions are trying to behave accordingly.

“If you look at our activities in these two years (since the launch of the goals), you’ll notice that the central bank is doing everything it can to help the nation meet the SDGs,” says a senior central banker.

“We’ve done a lot for SDGs. (Our supportive activities include) taking new initiatives, revamping old programmes and enabling banks to go for financial inclusion, poverty alleviation, women empowerment, green banking, lending for sustainable growth and innovative financing.”

The SBP has already launched the Credit Guarantee Scheme for Small and Rural Enterprises and the Technical Assistance Fund besides issuing detailed guidelines for Microcredit Guarantee Facility. It is also facilitating financially inclusive government-to-person (G2P) payments and promoting innovative rural and agricultural finance.

These initiatives are enabling conventional and Islamic banks, as well as microfinance institutions, in reaching out to the under-served segments of agricultural borrowers (including female farmers) and hitherto ignored small and medium enterprises (SMEs).

For agriculture and SME sector, the central bank is now setting more detailed lending targets for banks that should help us meet SGDs like poverty eradication, food safety, women empowerment, inclusive and sustainable economic growth and decent work for all.

In the last two years both agricultural and SME lending has seen growth. In 2014-15, gross agricultural lending of banks stood around Rs516 billion which rose past Rs598bn in 2015-16 and then soared to Rs704.5bn in the last fiscal year. Qualitatively, agricultural credit outreach also increased from 2.01 million in FY15 to 2.4m in FY16 and to 3.27m in FY17.

The stock of outstanding SME financing went up from about Rs261bn in FY15 to Rs297.5bn in FY16 and then shot up to Rs367bn in FY17. The number of SME borrowers also increased from 152,495 in FY15 to 164,734 in FY16 and to 176,847 in FY17.

The pace of increase, both in volumes of agricultural and SME lending and respective borrowers, is quite encouraging though there is still a need to accelerate it to ensure speedy job creation and fostering inclusive growth.

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