Banks' Lending - For Balanced Growth
Dear Friends, Salaam
There have been many good suggestions coming out from all sections to pull our country out of these crises. I also wish to put forth suggestions which will help, in the longer run, to take care of our FCY reserves not to be misused. Your healthy criticsm is welcome to refine my suggestions & will be beneficial for the nation's extravagant spending habit. I can further eloborate my view-point if required.
The process, put simply, goes on somewhat similar to below:
1. We receive revenue from Exports, remittances, aids & loans.
2. This revenue is then utilised for imports & budgeted spending.
3. Practically the inflow of money at stage 1 remains with the banks with which these banks increase their lending power under a process called 'credit creation'; and so on.
By experience it is learnt that misuse & embezzlement at many stages. A lot has now been discussed for the first two stages. No doubt expat Pakistanis & other investors are willing to bring their money back with the Parliament's act on place due to questions on credit-worthiness of the new Govt. Efficient utilisation is also in question but I wish to draw your particular attention to the third point specifically as this has given an open opportunity to the banks to lend their funds in whatever manner they like to their own benefit. In-fact commercial banks in Pakistan are enjoying more from their leasing business by whatever name they may call it while their statutory business was mainly trade & industry. With the connivance of some of the bankers & investors, artificial shortage of FCY is also created.
For the last 6-8 years commercial banks are mainly engaged in extending consumer loans creating a bubble of finance for the community while their role should be to focus on all sectors of the economy including, health, education , agriculture, etc. To cut-short, I suggest that their should be a legal binding on the banks guiding them how much to lend to which sector of the economy, funds which in-fact belong to the nation. The enclosed schedule is an initial attempt towards the direction I am pointing out. Of course that can be fine-tuned to the desired sub-level & can be further extended to other dimensions as well.
In a nutshell, the schedule suggests to diversify the lending exposure of the banks to the different sectors, under legal binding, of the economy for balanced growth so that we will not fall in the same ditch of consumer-oriented society again.
A Mon'min cannot be bitten from the same whole twice. (Al-Hadeeth)