Concern shown over weakening ties between banks, businessmen

KARACHI: Pakistan Economy Watch (PEW) on Tuesday expressed concern over weakening relationship between commercial banks and business community. Banks have been failing to meet the demand for private sector credit forcing the business community to opt for informal lending which is hurting businesses and the economy, it said.

Increased informal lending has taken tool on businesses, its helping flourish underground economy, increase cost of doing business, and hurt the competitiveness, said Dr Murtaza Mughal, President PEW. He said that high interest rates, energy crisis, cumbersome regulations, difficulties in expansion, and no visible change in the overall environment in the near future has forced three major groups to opt for overseas investment which should be a matter of concern.

Dr Murtaza Mughal said that commercial banks continue to prefer short-term investments over the long-term deals that have chocked growth of the productive sector which has started viewing informal lenders as the last option.

This in turn has encouraged parallel banking system in the country which has hit efforts to create employment opportunities and hike government’s income through widening tax net.

He asked the banks to stop considering borrowers of small loans as an irresponsible people who could not manage a budget so that they could no more stay away from small-time lending.

He also called for an action against the entities and persons involved in illegal lending and loan sharking.

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