Sinking the IDBP!

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While the bad governance and political interference has dragged many state corporations and other departments towards downfall or closure, the Industrial Development Bank of Pakistan (IDBP) is no more an exception. The bank has virtually become dormant for the last over ten years as not only its financial position has gone from bad to worst but also it has almost no justification to remain intact. The IDBP was the countrys oldest development financing institution created to extend loan facility for investment in the manufacturing sector. During the initial years, the bank no doubt was on track as it played an important role in fostering the growth and development of SME sector stimulating industrial progress in the rural as well as less developed regions of the country besides offering lucrative opportunities to the households and institutions for investments in its deposit schemes. Historically, development banks have been an important instrument of governments to promote economic growth by providing credit, loan guarantees, other financial services and a wide range of advisory and capacity building programmes to low-income households, SMEs, and even large corporations whose financial needs are not sufficiently served by private commercial banks or local capital markets. While in the case of the IDBP, the situation has become entirely different as it has gone into almost dormancy since 2003-04. The banks financial health is not satisfactory now and facing serious problems of non-payment of loans thus seriously affecting the profitability and liquidity. The bank data shows that around Rs82.524 million have been written off by the bank against the non-performing loans of eight industrial units. Moreover, it suffered a net loss of Rs1.496 billion during the year 2003-2004 as against Rs3.952 billion in 2002-03, depicting a decrease of Rs2.456 billion in 2001-02. Inadequate legal and judicial system, deteriorating culture system, general slowdown of the economy, adverse impact of sanctions, bad governance and the continuous political interference as well as favouritism are the factors which have negatively impacted the overall decline of the IDBP. The most painful factor that no government has ever turned up to rejuvenate this declining state institution, whose employees are a regular financial burden on the national kitty. The incumbent government, which has been mandated to ensure economic and industrial turnaround through taking targeted initiatives, also needs to come up with a passionate approach to regain the IDBPs lost image through improving its operations. Presently, the SMEs sector has appeared to be in shatters due to the non-existing patronage on the part of the official authorities, which must be the point of concern for the stakeholders. If the Bank is put back on track, it would not only trigger development activities but also provide employment opportunities in the country.


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Published in: Volume 04 Issue 33

Short Link: http://www.technologytimes.pk/?p=10594