Banks' targets should reflect social responsibility

Pakistan's banks are pressing ahead with their expansion plans despite an economic slowdown. The surge in the number of banks and branches, and the services they offer, clearly reflects the consolidation that has taken place in banking over the years, marking one of Pakistan's most important economic success stories.

This week's news of Malaysia's Maybank potentially spending up to $1 billion in buying a minority stake in Pakistan's Muslim Commercial Bank (MCB) - the first of the country's public sector banks to be privatised in the early 1990s - confirms that the recovery process continues at an impressive pace. The history of Pakistan's banking turnaround is important to mention here.

Since former prime minister Nawaz Sharif first oversaw the beginning of reforms in Pakistan's banks in 1997, lenders have covered a lot of ground at a fairly impressive pace. All but one of the public sector banks have been privatised while at least two large western banks have expanded their operations in Pakistan.

For consumers, too, the rising opportunities offered by banks in Pakistan offer a significant improvement in the quality of services. In the past decade, Pakistan has seen a robust proliferation in services ranging from credit cards to online transactions.

Banks have also become savvy in dealing with the foreign exchange needs of clients, facilitating inflows from Pakistani expatriates worldwide and outflows from Pakistanis dealing with foreign currency payments.

The sheer rise in the number of such transactions has helped to lift an important source of business for Pakistani banks, just at a time when their consolidation is well under way.

This consolidation is more than likely to be helped by the way Pakistan's economic profile has improved over the past few years. While the country today faces a relative economic slowdown, such a phase in Pakistan's life should not be different from the economic life of other countries, where ups and downs are accepted as part of a normal process.

Insecurity

Ironically, the fate of Pakistan's banks has also been helped by the way in which physical insecurity has become a growing problem.

Unlike yesteryears, it is just not fundamentally safe for individuals to go around with significant chunks of cash tucked in their pockets. The result of this trend is essentially that individual consumers have to consider alternatives such as online transactions.

While this trend continues at an impressive pace, Pakistan's banks must also be forced to consider the challenge of the huge disparities, which still continue in the country between the rich and the poor. Although banks are businesses and not charitable organisations, their long-term interests can not be detached from what goes on in the social sectors.

The downside of Pakistan's economic direction in the past five years has essentially been that while growth has gathered momentum, there has also been a failure to tackle the plight of up to one third of the population of more than 165 million, who live below the poverty line.

Among their contribution to tackle the vital social issues confronting Pakistan today, banks can set aside a part of their fast rising incomes, to facilitate scholarship programmes for students from impoverished families.

Other possible choices include dedicating funds to establish business development centres where students from impoverished homes, without exposure to corporate life, are trained to facilitate their entry to the business world.

The writer is a journalist working in Pakistan.