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Balochistan’s banking sector to come out of the woods

With Gwadar port set to fully functional soon, there are immense prospects for growth of banking industry in Balochistan. Lack of capital, low investment and low productivity has led to the low income of the province, and hence it is caught up in the vicious circle of poverty. The province’s human and material resources remained unutilized or underutilized. The people are technologically backward. Illiteracy is higher and hence the people lack the initiative and entrepreneurial ability. With a fully operational deep water port, the province can benefit both directly and indirectly from the tremendous commercial and trade activities leading to the revival of many sectors of provincial economy. A financial free zone needs to be established in Gwadar port city.

There are expectations that multi-national companies from across the world would transact their trade at Gwadar and provide the country much-needed foreign exchange.

Information and communication technologies (ICT) have brought about a revolutionary change in the financial sector. In major cities of Balochistan, the online banking has introduced non-traditional channels of delivering services in the banking industry.

Balochistan, the country’s least developed province, is also benefiting from online banking, which has accelerated financial inclusion gradually changing the financial landscape in the province. During the last five years, the banks have expanded their online branch networks, ATM networks and POS networks across Balochistan. Electronic payments continued to show a rising trend as both the number and value of such transactions increased in past three years particularly in the provincial capital Quetta.

Policy-makers must work on a strategy to increase the relative wealth among the local population and create a middle-class that will increase demand for banking facilities in the province. The local investors and businessmen should be provided more supportive financial services, meeting their demand for financing solutions.

Presently, the private banks are mostly concentrated in Quetta. Private banks are practicing customer-focused banking and providing modern banking facilities to their customers. In the provincial capital, the ATMs, telebanking, internet banking, credit cards and debit cards have emerged as effective delivery channels for traditional banking products. A credit card is offering valuable benefits to both consumers and banking industry in the province. It is a flexible payment tool accepted at millions of locations worldwide. Credit cards provide access to unsecured credit. They provide all-time access in a day. Moreover, credit cards offer air travel points, car insurance, damage and loss insurance and extended warranty programs. The retailers that accept credit cards receive fast and guaranteed payment, which can reduce line-ups at checkout. Now more bank branches will be opened in Gwadar, the emerging commercial capital of Balochistan.

The banks play important role in the economic development of a backward region. The commercial banks perform significant functions like channelizing resources to different sectors of economy, mobilizing the savings, promoting investment, accelerating industrialization and helping the government by providing it source of earning. Unfortunately, the commercial banks in the most backward and least developed province of Balochistan merely played the role of collection booths and hence could not promote industrialization by advancing loans to entrepreneurs. The province faces the shortage of entrepreneurs. If there are some, they are unwilling to take risk. If the banks make the funds available, the dynamic entrepreneurs can come forward. The banks should provide loans to the potential investors, provide them the necessary knowledge and help them establishing and launching industrial or commercial units, and thus creating job opportunities and developing human resources in Balochistan.

Industry, agriculture, business, communication and services have been the most neglected sectors in the province. In capacity of good and progressive financial institutions, the banks could not play their due role for the economic development of the province. In the past, the loans were not given to those who wanted to set up industrial units or launch some projects providing jobs and boosting economic activities in the province.

On the other hand, shopkeepers and smugglers largely benefited from the bank loans. Most of the private banks were in control of commission mafia and getting kickbacks. The law and order situation and tribal culture has also been hampering the private commercial banks to play their role of key agents along with the entrepreneurs.

Like other provinces, Balochistan is also the beneficiary of the current low interest rate, particularly in consumer financing, which has emerged out as one of most prolific aspects of banking in Pakistan. Consumer financing products include credit cards, personal loans, auto loans and housing mortgage. It not only contributes towards facilitating the life patterns of consumers, but it also proves to be a source of improvement for the image of banks. A need is strongly felt to strengthen the regulatory mechanism for strengthening the consumer financing sector in the province.

The banking sector in Balochistan still needs to take effective measures for improving and strengthening its competitive position vis-à-vis other provinces. Basically, a tribal society, the province lacks an urbanized middle class. Truly speaking, the relative wealth increases among the population when a burgeoning middle-class brings greater demand for banking facilities and investors and business also look for more supportive financial services, with a demand for financing solutions, hedge funds, and asset-based securities.

Balochistan needs to place ICT on its priority list to keep pace with the advancement in technology and minimize digital divide. The provincial government needs to take measures for creating a conducive environment for technological innovation and its effective use in financial sector. The banks offering mobile banking services in Quetta need to develop aggressive marketing plans and campaigns to attract customers to visit the agent location for their banking transactions. The banking industry must be able to meet increasingly complex banking needs if it is to flourish in Balochistan. The province cannot catch up with other developed regions of the country in terms of economic development without making investment in new banking technology.

Customer awareness should be increased to encourage use of services such as ATM, credit cards and internet banking in Balochistan. ATM is the predominant alternate delivery channel of e-banking that leads the retail level e-banking/online services in terms of volume.

The banking sector still requires expansion and upgradation of the ATMs to overcome customer complaints across the province. The banks must ensure provision of uninterrupted ATM services to customers and take responsibility for resolution of all types of issues emerging from outsourcing of ATM replenishment.

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