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 billion.

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 non-performing loans.

-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.