Diversifying operations to
remain in the game
April 15 - 21, 2002
Pakistan Industrial Credit and Investment Corporation
(PICIC), the only Developing Financial Institution (DFI) after waning
out of the two other DFIs i.e. NDFC and BEL from the financial scene,
facing difficulties in finding borrower due to sluggish trend in the
arrival of new industrial projects in the country despite having a walk
over in this sector.
Although there are strong signals of recovery at the
macro-economic level yet the national economy has yet to take off at the
desired level so that the PICIC could meet its target of long term
financing of industrial projects for which a fund of Rs3 billion was
earmarked for the financial year 2002.
However, in order to remain active besides getting
involved in commercial banking PICIC is launching its international
operations by initiating its commercial bank branches in Kabul and
Kandhar to facilitate trade activities between Afghanistan and Pakistan.
Muhammad Ali Khoja, Managing Director PICIC while
speaking at Karachi Chamber of Commerce and Industry recently said that
the State Bank of Pakistan has already granted permission to PICIC to go
ahead with its plans to open bank branches in Afghanistan. Besides the
commercial bank's branches, PICIC also actively taking another project
that is PICIC Exchange Company to operate from United Arab Emirates.
PICIC which was also suffering from huge amount of
stuck up loans has however done wonderfully to get back its money and
out of a total amount of Rs20 billion inoperative loans, it has already
realized Rs17 billion. Credit however goes to its leadership especially
Khoja who involved Corporation's relevant officials responsible for the
approval of the loans for getting back the sinking money. They were
asked that since the advances were made on their recommendations they
must have known better about the ins and outs of the concerned
borrowers. The idea clicked and the corporation has realized a major
amount of the infected advances. The recovery staff was however given
incentives to make the recovery drive a success.
PICIC is a pioneer development finance institution
and has played a key role in the industrial development and creation of
industrial infrastructure in Pakistan. PICIC is the largest private
sector development finance institution with equity of Rs1.9 billion,
which would cross Rs2 billion by June this year. The corporation is
expecting to raise authorized capital to Rs2 billion by June 30, 2002
for which necessary approvals from concerned authorities have already
been obtained. Pakistani and foreign investors established it with the
assistance of World Bank for providing development finance to private
sector. Today, PICIC has the honour to have financed 1199 industrial
units spread all over the country with gross assistance of Rs35.18
PICIC's financial and operational position remained
satisfactory until early 90's however due to domestic financial and
economic turmoil which were unavoidable, PICIC like other financial
institutions of the country could not sustain its financial soundness
and stability and landed into a grim situation, facing major financial
difficulties arising out of persistent sluggish behaviour of the
economy, textile sector crisis, continuous bearish spell of the stock
market, drying-up of foreign credit lines. All these factors adversely
affected PICIC's operational performance in the following areas:
-Increased portfolio infection resulting in huge
-Deteriorated operating performance as the
Corporation sustained operating loss of Rs299 million in 1995-96.
-Stained liquidity position.
-An all time low equity portfolio resulting in
substantial yearly diminution.
-Ever increasing establishment expenses in spite of
the deteriorating income level.
Consequent to the above factors, PICIC's
profitability and liquidity was significantly reduced, as it could not
serve its financial obligations payable to the government of Pakistan.
Muhammad Ali Khoja after assuming the charge of the
corporation as Managing Director in 1996 made careful and critical
analysis of the state of affairs and decided to revitalize the
Corporation for the purpose of bouncing back. He declared a 4 point
agenda to achieve the targets. Under the recovery agenda, the first
target was the fast recovery of the stuck up advances, second was
revision of resource mobilization strategy for better deposit-mix
through innovative deposit schemes. Other targets were re-activation of
Treasury and Capital Market operations and introduction of expenditure
budgeting system with special emphasis on austerity drive.
For five years until 1999, PICIC did not pursue its
core business of long term financing due to non-availability of foreign
credit lines. Instead, it focused on consolidation and targeted
expeditious recovery of loans. The enhanced cash recovery enabled PICIC
to resume long-term project financing. Therefore, it approved Rs 2,053
million in 2001 as compared to Rs928 million last year reflecting an
increase of 120 per cent in the approved funding.