Recently,
State Bank of Pakistan has issued its annual
report for the fiscal year 2005. According to
this report, the year remained eventful in
many aspects including record high economic
growth fueled by unprecedented rise in credit
off-take by private sector, remarkable
performance by banking industry, record high
oil prices, and highest inflation in last 6-7
years. While the extraordinary performance of
the economy that owes overwhelmingly to the
sounder and more efficient financial system
epitomizes the success of reforms pursued over
the last few years, the build-up of
inflationary pressures particularly in the
second half of the year shadowed the
achievements on economic front to some extent.
The fiscal year witnessed phenomenal rise in
profitability of the banking system, which
reached an impressive Rs. 22.8 billion in the
first six months ending June 2005 after
touching record Rs. 32.9 billion in the
calendar year 2004. The year also witnessed a
handsome growth of more than 20 percent in the
balance sheet footing, substantial improvement
in capital base and thus enhanced solvency
levels, and increased focus on developing
necessary risk management systems.
The year proved significant in terms of
efforts made to promote Small and Medium
Enterprises (SMEs), agriculture, micro,
housing and Islamic finance sectors, which
remained less served till recently. While a
large portion of the 33 percent growth in
total loans of the banking system went to
finance the needs of the corporate sector, a
substantial portion also flowed to consumer,
SME and agriculture sectors. The consumer
finance almost doubled during the year to Rs.
206 billion; the SME portfolio rose to Rs. 284
billion; the disbursements to agriculture
sector reached record Rs. 108.6 billion with
commercial banks accounting for two third of
the total disbursements; the outreach of
microfinance banks extended to 213,000
borrowers in 66 districts across the country
and Islamic banking branches increased
threefold to 62. This growing interest of
banks and financial institutions in these
sectors provides a win-win situation for all
the players; for the banks, to diversify and
increase their earning potential, for the
sectors, to avail themselves of the hitherto
less or non-existent banking services, and for
the government and regulators, the achievement
of the objectives of financial sector
broadening an deepening, equitable growth &
alleviation of poverty.
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