HYDERABAD: President Hyderabad Chamber of Small Traders and Small Industry Muhammad Farooq Shaikhani has expressed concerns about the ability to safeguard customer interests and legitimate rights within the current banking sector.
He highlighted the juxtaposition of the sector’s highest interest rates and attractive profits, citing State Bank of Pakistan statistics that indicate a substantial increase of Rs. 5,354 billion in the deposits of all Pakistani banks from December 2022 to December 2023.
Despite reaching a historic high of 27,840 billion rupees in total deposits, Shaikhani pointed out the challenges faced by small and medium industries.
Those businesses that secured loans from banks to initiate operations are grappling with soaring interest rates and stringent conditions, leading to the erosion of both capital and business within a few months.
Shaikhani highlighted the prolonged maintenance of a 22% interest rate by the State Bank of Pakistan over the past four months, emphasizing that this rate stands as the highest in Asia, second only to Iran. In contrast, neighboring countries like India and Bangladesh maintain significantly lower rates at 6.5%.
He pointed out that the Federal Shariah Court of Pakistan has declared the interest-based economic system incompatible with Islamic Sharia, mandating a transition to a completely interest-free banking system by December 2027.
However, Shaikhani lamented the parity in financial exploitation experienced by customers in both non-Islamic and Islamic banking sectors. He criticized the prevailing banking laws, citing their unilateral focus on interests and discretionary powers that primarily benefit banks and borrowing entities.
Despite entrepreneurial efforts to expand businesses, many find themselves unable to navigate the stringent conditions imposed by banks, leading to dire consequences such as insolvency and, tragically, even suicides.
He drew attention to the successful model of Bangladesh, exemplified by Dr. Muhammad Younus and the Grameen Bank, recipients of the 2006 Nobel Prize for their impactful work in microfinance.
Dr. Younus empowered 8 million women with small loans, enabling them to establish and enhance small industries, thereby transforming their families’ lives.
Shaikhani also highlighted a comparable success story in Pakistan, embodied by the Akhuwat Foundation, founded by Dr. Amjad Saqib, dedicated to Islamic microfinance with over 826 offices in 400 cities and a workforce of 7,000 employees, the foundation has provided loans to approximately 3 million people in two decades.
Copyright Business Recorder, 2024
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