Islamabad Chamber of Commerce and Industry (ICCI) President Atif Ikram Sheikh said on Friday that the amount of loans extended by commercial banks to the private sector was on the decline.
Showing concerns over the shrinking credit facility to private sector, he said in a statement issued on Friday that it would constrain the growth of business and industrial activities and create more hurdles in the way of efforts aimed at economic revival of the country.
He said as per the SBP Annual Report 2014-15, the overall credit to private sector saw a lower expansion of Rs 208.7 billion during FY15, compared with Rs.371.4 billion in FY14 which shows 44 per cent decline in credit for private sector in one year.
The president said the quantum of credit to private sector as a percentage of GDP had also shrunk from 27 per cent in 2007-08 to 13 per cent in 2013-14. He said many countries were achieving better economic growth by providing enhanced credit to private sector but Pakistan’s credit-to-GDP ratio was still substantially low as compared with many other countries.
He said as per World Bank’s data for the period 2011-15, domestic credit to private sector in Japan as a percentage of GDP was 187.5 per cent, Denmark 178.7 per cent, Thailand 146.7 per cent, South Korea 138.5 per cent, Malaysia 120.6 per cent, Turkey 74.6 per cent, Indonesia 36.5 per cent, but in Pakistan it was just 15.6 per cent, which clearly showed that successive governments in Pakistan had not paid any serious attention to provide easy lending to SMEs in order to facilitate the private-sector led growth of the economy.
Ikram Sheikh said that another flaw in their bank lending was that bank credit in Pakistan was heavily skewed towards big corporations because, according to SBP annual report, more than 80 per cent of the total loans by the banking sector was given to big borrowers while the rest was going to SMEs and other small borrowers. He called upon the government to look into these anomalies in bank lending and take measures for rationalising and enhancing the share of banking credit for SMEs so that these business entities could drive the country on fast track economic growth.
