June 02 - 08, 2008

Commercial banking faces enormous challenges in Balochistan. It can dent the vicious circle of poverty and underdevelopment by playing a crucial role in the economic development of the province. Unfortunately, the commercial banks merely played the role of collection booths in the province and hence could not promote industrialization by advancing loans to entrepreneurs. They could not perform their key functions of channelizing resources to different sectors of provincial economy, mobilizing the savings, promoting investment, accelerating industrialization and helping the government by providing it source of earning. Industry, Agriculture, Business, communication and services have been the most neglected sectors in the province. In capacity of good and progressive financial institutions, the commercial banks could not play their due role for the economic development of the province.

Banking system has illustrated its capability to be strong and robust system which has great prospects and potential to grow given the retail market of this country as captured by its population base and growing per capita incomes. Foreign banks are rapidly expanding their network in Pakistan by opening new branches and acquiring small and medium banks, especially those, which are financially weak and are unable to meet the central bank's requirement of enhancing the paid up capital over year. Foreign banks have substantially increased their share in the country's banking system in the last five years. For example, Standard Chartered Bank has acquired Union Bank, ABN-Amro has acquired Prime Bank, Tamasek of Singapore has established NIB Bank. There are other transactions, which are in the pipeline and reflect the robustness and profitability of banking sector in Pakistan. The estimated share of foreign banks in the banking industry has reached 13 per cent. In terms of assets, foreign investors possess about 42 per cent banking assets of Pakistan. The country's banking assets during the five-year period have grown from Rs2,223 billion to Rs4,884 billion; advances from Rs1,062 billion to Rs2,603 billion; and deposits from Rs1,678 billion to Rs3,691 billion.

Banking system and its operation is not compatible with the requirements 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 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 Mezan 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.

Financial sector has played an important role in the macro-economic growth of Pakistan. The banking sector in particular has the potential to grow further. Its vitality and expansion have been crucial for national economy. The existing foreign banks have by and large enhanced their presence and stake in Pakistan along with new foreign banks that have entered the domestic market for the first time. Balochistan 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. Recovery of loans is the problematic area for the private banks due to the social, political and other barriers in the province.


Balochistan still lacks 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.

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.

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 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.


Present government needs to formulate a viable strategy for promotion of commercial banking in Balochistan. First of all, law and order situation needs to be improved. Secondly infrastructure projects should be launched for improving access to remote areas of the province. Thirdly, banking network needs to be spread across the province by opening more branches of commercial banks. Banking operations need to be diversified and banks should assume an active role in the economic development of the backward province.

Fourthly, the efficient and competent bankers should be appointed in the branches of remote areas with a task to mobilize genuine entrepreneurs and investors for launching industrial or commercial units. Finally, the government should also encourage private banks to open their branches in remote areas of the province and help them to improve the recovery side of bank loans.