A country like Pakistan that has a vibrant population and other glamorous resources can be a heaven for investors when major problems pertaining to the economy are removed. In an industry, efficient utilisation of resources is possible only if there exists a favourable atmosphere for all input as a contributor to accomplish long term goals.
In a developing country like Pakistan the demand of a common individual can be simply envisaged as he only desires to be a real economic player by getting employment and knows the fact that other things will be alright automatically. Nobody can deny the reality that FDI dependent on a conducive environment brings not only portfolio but technology as well, resulting in the addition of skilled rather than unskilled population. Aggregate foreign investment also pushes the business cycle’s trend towards its peak.
Public and private sector investments are pivotal factors to strengthen the important macroeconomic dependent variable that is the employment rate, apart from other positive consequences. However, the current scenario in Pakistan is extremely unfavourable both for domestic and foreign investors due to the upcoming elections, which can have an impact on the steady growth of the national economy.
The real question to be asked is why investment activities in Pakistan are at a low level when most of the other countries in the region are attracting high level of foreign and domestic investment. When seen closely, investors are rational human beings and do not believe Pakistan to be a favourable destination/place for investment, especially at the present time. Although dividends are high in Pakistan as well as we have a good enabling regulatory environment, but no foreign investor likes to invest in a country where his investment is not secure, fiscal policies are mostly inconsistent and he cannot even visit the country for fear of his life!
In this situation, it is a good omen to see that when banking industry is not very much interested in extending credit to private sector for a variety of reasons, they continue to increase their focus towards the agricultural sector knowing the fact that real growth lies in this sector. The agricultural sector dominates as the largest provider of employment in Pakistan, with a share in the overall employment of 45 percent. It is also good to know that conventional banks, Islamic banks and microfinance banks desire to open new business places during this year, thus the total number of bank branches across the country will reach 11,808 by the end of 2013.
Another good sign both for potential MFBs and entrepreneur market is that the SBP has amended regulation 10 and 11 for MFBs, which now allows credit exposure up to Rs 500,000. As a result, Tameer Microfinance Bank is the first private practitioner that has launched Enterprise Loans in Pakistan with effect from April 2013.
The Micro Enterprise Lending initiative can be a key component of credit to SMEs to sustain employment, prosperity, increase net export and rebuild the economy. With this in mind the government should be committed to support the SME sector in every way to develop their businesses.
No doubt, microfinance banks have emerged as key players in enhancing the process of financial development in the economy. However, lack of funding resources, capacity building and product innovation remain major challenges for the microfinance banking industry. However, MFBs having branchless banking modules are capable of diversifying their deposit portfolios. Savings are attracted by adopting new technologies and alternative delivery channels such as mobile phones and agent banking.
Branchless banking seems to be the future in Pakistan. Due to the existing diversified business trend of Telecommunication companies, this innovation has provided a culture of ‘accessible to all’, with the collaboration of MFBs, while traditional banking industry has failed to meet the needs of a vast society especially the active poor living in rural and semi urban areas.
In addition, even NGOs are seeking help from this module in portfolio disbursement and collection in remote areas. For example, Asasah’s clients are able to receive disbursed loans at any of Tameer Microfinance Bank outlets and are able to repay the loans via Telenor’s Easypaisa branchless banking solution.
Having seen the existing realities and developments, it is easy to say that there are still good omens for our developing economy. As quoted by a Dutch entrepreneur in a national daily, “Pakistan is an equitable society where people have similar opportunities and chances, and where success is based on merit.”
The writer is associated with the applied economics and research centre, Karachi University