Dec 21 - 27, 2009

Balochistan is currently facing a mild insurgency. The law and order is continuously worsening. The security problem has affected each and every sector of the provincial economy. Similarly, the growth of banking industry has been anemic due to law and order situation in the province for the past five years. The law and order problem has been hampering the private commercial banks to play their role of key agents along with the entrepreneurs.

Besides security reasons, other factors also affected the growth of financial sector, particularly banking, in the province. The important role of banks cannot be denied 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.

Loaning side is not secure in Balochistan, as recovery of loans is the problematic area for the private banks due to the social, political and other barriers in the province. The province lacks the genuine entrepreneurs and hence the private banks generally avoid giving loans for setting up small industries. Some private banks even banned loaning to the entrepreneurs in the province. The private banks are mostly concentrated in the provincial capital, Quetta, which has the presence of many private banks like Standard Chartered, Al-Falah Bank, Al Habib Bank, KASB Bank, Faisal Bank, Prime Bank, Soneri Bank and Meezan Bank. Private banks are practicing customer-focused banking and providing modern banking facilities to their customers in Quetta. Most of their customers are flour mill owners, Ghee companies, shopkeepers, trading companies and from mining sector.

Balochistan has been lacking the banking facilities. The banks flourish a saving culture among the people by introducing different saving schemes. The saving environment could not be created due to the lack of banking facilities in the province. The banks, nationalized and commercialized, did not play their key role in developing the local economy. There has also been a dearth of professional and skilled bankers in the province. Most of the bankers were unaware of the mechanism of banking system. There has been no concept of investment bank in Balochistan.

Banking system and its operation is not compatible with the requirements or up to the expectations of the people of Balochistan. Few years back, many branches of banks were closed which caused difficulties for the people to deposit utility bills, draw salaries and pension etc. The people still have to travel longer distance to get these facilities in the province.

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.

The deficiency of resources is the root cause of its underdevelopment. 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. The province lacks the skilled and trained labor to utilize its natural resources. Resultantly, its resource potential remained untapped and the province has been caught up in underdevelopment trap.

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 province needs an effective banking system channelizing the resources to the neglected economic sectors. Banks can help exploit the potential opportunities of industrial development in fisheries, agriculture, handicrafts and other sectors of local economy. The efficient and professional bankers are needed to guide the potential investors and entrepreneurs, promote saving environment and mobilize the small businessmen in the province. Above all, the education must be considered today as the highest return-investment for the development of Balochistan.

Security however remains a problem for the banks to carry out their operations in the prevailing law and order situation in Balochistan. Micro credit banking has emerged out to be an effective tool to combat wide spread poverty in the third world countries. The lack of adequate human and institutional capacity, shortage of local expertise and weak coordination among various stakeholders are the main hurdles in expanding micro-finance in Balochistan. Micro-finance banks are aimed at providing access to sustainable micro-finance services for the poor to enhance their income earning capacity.

Balochistan with its challenging security environment needs a comprehensive micro-finance development strategy to alleviate poverty. A strategy should be devised to ensure the access of poor and low-income households to institutional financial services. The Micro credit banking in private sector can play a vital role in accelerating economic growth, facilitating finances to the down trodden sections for their socio-economic uplift and eradicating poverty from Balochistan. Micro financing can prove a vital approach to alleviate poverty and combat joblessness in the province, as it would help build human capacity. The government needs to take all steps to improve law and order for growth of banking sector including micro-financing in the province.

Present government should announce a clear-cut time-frame and a roadmap for implementation of its reforms package for Balochistan. The time calls for practical steps to bring disgruntled Baloch into the mainstream and an immediate halt to use of military might. The province is growing poorer and its economic growth lagging behind that of the other provinces, according to a World Bank's latest economic report on Balochistan.