By Abdul Wajid Khan ISLAMABAD, Mar 22 (INP-WealthPK): The State Bank of Pakistan (SBP) has said it is making concerted efforts to encourage banks to increase their lending in financially excluded areas of the country. According to an official brief of the SBP, a copy of which is available with WealthPK, the SBP has adopted a comprehensive approach for improving lending operations across the country. It is already making efforts for financial inclusion coupled with other persuasive measures to encourage banks to increase their lending exposure across the country. This approach includes National Financial Inclusion Strategy (NFIS) and special measures to address the issues related to lending of the banking industry in all parts of the country, particularly in Khyber Pakhtunkhwa and Balochistan. The SBP governor conducted specific meetings in Peshawar and Quetta with the presidents/chief executive officers (CEOs) of commercial banks with a one-point agenda on how to strengthen and expand the lending activities in KP and Balochistan. For KP, banks were asked to specifically implement the action points with a timeline and regular reporting to the central bank. The action points include a concrete three-year strategic business plan on improving lending activities through setting sector-wise financing targets. Banks need to market their products to small and medium enterprises (SMEs), trading communities and entrepreneurs, and conduct financial awareness programs. They need to engage with local chambers of commerce and industries, SMEs associations and government agencies to improve access to finance in these areas and hire suitable local staff for banking operations in KP. For Balochistan, banks were also given specific action points which include a concrete three-year strategic business plan on improving lending activities through setting sector-wise financing target. Banks were required to increase in branchless banking (BB) agents, BB accounts and installation of ATMs. Establishment of branches in far flung areas of Balochistan was also recommended. The banks were asked to market their products to SMEs, trading communities and entrepreneurs, and conduct financial awareness programs. In addition, the SBP also recommended certain measures for the federal and provincial governments for improving lending activities in KP and Balochistan. The SBP recommended that the provincial governments allocate funds for providing credit risk coverage on bank financing to SMEs in their respective provinces. The governments can increase markup subsidies for small farmers and enterprises in underserved areas of the two provinces. Also, the provincial governments can introduce insurance schemes on livestock and crop loan. The SBP also recommended establishing cold storages and warehouses for farmers, SMEs and fisheries. It proposed necessary land reforms for addressing the collateral related issues in KP and Balochistan and reducing stumps duties on mortgages to facilitate banks in bringing down their cost and increasing financing in these areas. To enhance the commercial banks’ lending in underserved areas, the Senate Standing Committee on Finance has recently cleared the State Bank of Pakistan (Amendment) Bill (2021). The bill proposes to set a minimum private sector credit for each of the province and Islamabad Capital Territory (ICT) pegged with the total deposits raised by banks from these areas. The SBP Governor Reza Baqir told the committee that central bank was taking steps to resolve the issue and working on multiple solutions so that distribution of private lending could be rectified. Provinces should also direct the official banks to increase lending in the underserved areas. He added that currently the SBP has launched initiatives to increase financing in underserved sectors and areas. He said the SBP has developed special scorecard table to promote lending in such areas. He said the governments can also incentivise the private banks to increase lending. While talking to WealthPK, the mover of the bill, Senator Mohsin Aziz expressed pleasure on clearance of the bill from the Senate panel. He said that after the completion of the legislation, private banks’ lending to underserved areas will rise up to 60% of their total deposits raised from these areas. “It will promote industries in these areas, create employment opportunities and boost business activities,” he said. Senator Mohsin Aziz said commercial banks raised trillions of rupees from smaller provinces, but did not lend in these areas. Currently, their lending rate was less than 1% of their total deposits from these areas. The banks raised around 26% of their total deposits from these areas.