ISLAMABAD, Pakistan: The former Finance Minister Shaukat Tarin on Wednesday said Pakistan had a very well established banking system, and it could assist Central Asian Republics (CARs) in bringing massive transformation in their Banking Sectors as well.
While delivering an address on the topic “Pakistan a Land of Opportunity: The Security Paradigm” at an International Conference “Pakistan: A Land of Opportunities for Central Asian Republics” in Islamabad which was also attended by regional experts and delegations, Shaukat Tarin said Banking Sector Reforms lied at the heart of Pakistan’s GDP growth performance – up 7.3 times from US$40 billion in 1990 to US$292 billion in 2017.
Shaukat Tarin said banking was the Central Channel to transport National Savings into productive loans and investments; therefore, it had to be given the highest priority. He said CARs could speed up their Banking Sector Reform process through collaboration with Pakistan.
The former finance minister said in late 90’s, Pakistan decided to undertake vital Banking Sector Reforms to meet serious growth objectives. He apprised that eventually Pakistan undertook Banking Sector Reforms which included Restructuring and Privatization of Public Sector Banks; Opening of the Sector to Private Investment; Raising Capital Requirements; Improving Asset Quality; Liberalizing Foreign Exchange Regime; Strengthening Prudential Regulations; and introduced Islamic Banking, Consumer Financing, Mortgage Financing, SME Financing, and Micro-financing. Besides, he added, Pakistan also ensured legal as well as taxation reforms.
Shaukat Tarin said resultantly Banking Sector Reforms bore fruits, and now more than 80% of the Banking Industry in Pakistan was in Private Sector and running efficiently. He said there was an efficient regulator that oversaw the industry while banks were motivated to compete on service and quality of products.
In addition, he apprised that in Pakistan, non-performing loans (NPLs) were down to less than 9% of total loans as new loans had recovery rates of over 90%. He said improved recovery laws kept balance sheets healthy, and lower tax rates – from 58% to 35% – encouraged sponsors to continue investing for growth.
Likewise, he added, Corporate Lending had enabled the Country to set up large projects across Telecoms, Power, Oil and Gas and critical infrastructure.
Shaukat Tarin said there was a thriving Consumer Industry in Pakistan – generating taxes, creating employment and raising disposable incomes – on account of Consumer Financing.
The former finance minister further said following its introduction, Islamic Banking’s contribution in overall financing had risen sharply. He said SME financing was witnessing a major revival through program based lending. Likewise, he added individuals at lower incomes were taking credit from Micro Finance banks which were growing aggressively.