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Robust changing trend in Balochistan’s financial sector

Strategically located Balochistan offers tremendous opportunities for growth of financial sector as the security situation in the province continues to improve and the projects under the China-Pakistan Economic Corridor (CPEC), development of Gwadar Port and untapped natural resources have brought the province in the radar screen of international investors. Present government led by Prime Minister Imran Khan needs to 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.

Pakistan Financial Inclusion and Infrastructure project has already been launched aiming at increasing access to financial services for households and businesses by improving usage of digital payments in the country. The project will be implemented by the recently-established Pakistan Microfinance Investment Company, the Central Directorate of National Savings and the State Bank’s development finance group. In 2015, Pakistan launched the National Financial Inclusion Strategy (NFIS) with a vision to allow individuals and firms access to a range of quality payments, savings, credit and insurance services.

Pakistan’s financial sector has transformed into a modern and sound financial sector dominated by private banks. The banking sector accounts for 75% of financial sector assets. The microfinance sector is significant in terms of financial access. Islamic finance is growing rapidly, and currently accounts for 11% of sector assets. The World Bank committed to provide $130 million finance for the project.

Unfortunately, Balochistan still lacks access to formal financial services including savings, credit, insurance and payments vis-à-vis formal financial intermediaries, at an affordable cost. There are the clear directives of the central bank to the banks to prepare at least a three-year plan to strengthen their presence in Balochistan by taking concrete steps to increase financing under the concessional schemes and to promote businesses in the province. The central bank has directed that all banks are needed to take measures to increase the number of branchless banking agents, branchless banking accounts and ATMs in the province and open branches in underserved districts of the province.

The banking sector still requires the expansion 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. 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.


In the provincial capital Quetta, 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. Balochistan needs to place Information and Communications Technology (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.

Balochistan is basically a tribal society; hence it 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. 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. The banks play important role in the economic development of a backward region all over the world. 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 could not promote industrialization in the province by advancing loans to local entrepreneurs. 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. 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.

The country’s banking sector will continue to face headwinds in 2019 and 2020, on the back of rising interest rates and slowing economic growth, according to an outlook report on by Fitch Solutions Macro Research. Fitch believes that the government’s direct borrowing from the State Bank of Pakistan (SBP) increases the risk of reduced transparency and could potentially lead to higher inflation in the country. Fitch however, believes that other key performance metrics suggest that the banking system is broadly stable from a systemic perspective.

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