The economy witnessed a healthy increase in private credit of Rs 775.5 billion in fiscal year 2018 as opposed to Rs 747.9 billion in the previous year which is lower compared to regional countries. This was noted in the State Bank of Pakistan's 'Annual Report 2017-19; the state of Pakistan's economy laid in the Senate on Friday. The report added that the increase took the private sector credit to GDP ratio to an 8-year high of 17.4 percent.
However, despite the increase in recent years, private sector credit to GDP ratio in Pakistan at end fiscal year is much lower than the peak of 27.2 percent just a decade ago. Importantly, it is also stands lower compared to regional economies, such as India (49.5 percent), Bangladesh (47.6 percent) and Sri Lanka (45.7 percent).
Agricultural credit disbursement stood at Rs 972.6 billion in the fiscal year 20I8, registering a healthy growth of 38.1 percent, on top of 17.8 percent increase seen a year before. The disbursement remained broad based, as production loans increased by 38.5 percent, while development loans grew by 32.4 percent. Bank-wise analysis reveals that five major banks performed well, with credit disbursements exceeding their respective targets.
However, specialized institutions in the sector, namely Zarai Taraqiati Bank Limited (ZTBL) and Punjab Provincial Cooperative Bank Limited (PPCBL) achieved only 66.6 percent and 71.5 percent of their targets and recorded a contraction in the disbursement amount as well. As for domestic private banks and Islamic banks, even though the disbursement fell short of their respective targets by 7.6 percent and 18 percent, their growth of around 33 percent in the year was a positive development.
The overall credit outreach of the banks dropped by 5.1 percent during fiscal year 20I8, as the number of borrowers marginally reduced to 0.94 million by end last fiscal year, from 0.99 million at end fiscal year 20I7.
Sector-wise breakdown reveals that in fiscal year 2018 the focus of banks' lending remained tilted towards non-farm sector with 50.4 percent share in overall agriculture lending. The banks' increased lending to non-farm sector was attributable to ongoing developments in livestock and poultry segments in the country. However, the focus of specialized banks still remained on the farm sector, with more than 70 percent share in their credit disbursement.
Microfinance banks and institutions/ Rural Support Programmes (RSPs) also performed well, as their credit disbursements in the entire agriculture sector exceeded their targets by 12.5 percent and 11.5 percent respectively.
Their aggregate credit outreach also witnessed substantial growth of 28.5 percent, with the number of borrowers for microfinance banks and institutions reaching 2.8 million by end of fiscal year 20I8, increasing from 2.2 million at end fiscal year 2017. The report also revealed that this was mainly attributed to disbursement of small amount of loans without any credible collateral. The attention of these institutions also remained in favour of non-farm sector, representing 51.8 percent share in their overall agriculture lending.
Private businesses took Rs 471.7 billion working capital loans in fiscal year 2018, compared to Rs 367.4 billion last year. As usual, manufacturing concerns remained the main beneficiaries. Sectors which drove the higher credit expansion included textiles, cement, electrical machinery, iron & steel, edible oil & ghee, basic chemicals and rice processors.
However, expansion in loans for fixed investment remained lower in fiscal year 2018 compared to fiscal year. The slowdown came primarily from the fertilizer sector, as scheduled retirements of earlier loans were made, and also from the power sector where fresh capacity installations remained subdued.
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