Dubai: Performance of Pakistan’s banking sector last year remained steady with improved earnings and robust solvency, according to State Bank of Pakistan (SBP) Governor Ashraf Wathra.
The sector as a whole has high return on assets (RoA) of 2.3 per cent and strong capital adequacy ratio (CAR) of 16.3 per cent, well above the 10.25 per cent minimum regulatory requirement.
“Our banks are well capitalised and we are continuing with the financial sector reforms agenda for strengthening the legal, regulatory and supervisory framework aimed at safeguarding stability of the financial sector,” said Wathra.
The government and the central bank have developed a comprehensive National Financial Inclusion Strategy (NFIS) to implement financial reforms to meet financing needs of the marginalised and unbanked segments of society. The strategy lays particular emphasis on including the female gender into financial inclusion. Under SBP guidelines banks and Microfinance companies have opened about 750,000 simple and small accounts last year.
“The financial inclusion programme developed in association with the World Bank aims to reach out to the adult under-served segment of the population. This opens the way for people to be active part of the economy to access credit and make investments,” Wathra said.
In 2008, only 13 per cent of Pakistan’s adult population had any kind of access to financial services. According to a SBP survey in 2015, the number has gone up to 23 per cent. “By year 2020 we are targeting this number to reach 50 per cent. To achieve this target, we are working closely with commercial banks and regulated micro-finance companies,” he said.
In relative terms, the banking sector has strong asset quality with the average non-performing loans (NPLs) ratio at 13 per cent which is largely provisioned; leaving the net NPLs at only 1.9 per cent. “Even these NPLs are fully backed by assets and that is the reason these are not provisioned,” said Wathra.
On the entry of new foreign banks, the central bank governor said, Pakistan is open to foreign players and would welcome new entrants into the market.
