Q-5 = Name sources of industrial and agricultural financial institutions and discuss their role in economic development of Pakistan
INDUSTRIAL FINANCIAL INSTITUTIONSMajor sources of industrial finance are as under: -
1. Commercial banks
2. Industrial Development bank of Pakistan
3. Pakistan Industrial Credits and Investment Corporation
4. Investment Corporation of Pakistan
5. National Investment Trust
6. Small Business Finance Corporation
7. Khushali Bank
8. Micro Finance Bank
SOURCES OF FINANCE FOR INDUSTRIES AND AGRICULTURE:
1. COMMERCIAL BANKSCommercial banks of Pakistan are making funds available for industrial projects. They are a major source of working- capital for industries covering purchases of short-term assets such as materials and components, financing of work in progress and the stockholding of final products. These banks are playing a dominant role in promoting economic development by mobilizing financial resources of the community and by making them flow into industrial progress and development.
2. I. D. B. P. Industrial Development Bank of Pakistan is playing a vital role in development and progress of private industrial sector. It provides long and short-term loans in local as well as in foreign currency for setting up new industrial units and for modernization of existing old units. Its local currency source of capital is its paid up capital and credits from Central Bank where-as it borrows foreign currency from Islamic Development Bank, Asian Development and from other international financial agencies. Bank advances loans to those projects which (1) either earn foreign exchange by exports its products, or save foreign exchange by setting up industries of import substitution, (2) Utilizes locally produced machinery (3) and the units are set up in less developed areas of the country. This bank has so far advanced loan facilities of Rs.24 Billion to about 6000 projects.
3. P. I. C. I. C. Pakistan Industrial Credit and Investment Corporation have a crucial role in the development of private industrial sector. Its local currency source of capital is its paid-up capital in which International Finance Corporation (IFC) has also contributed. The bank borrows foreign currency from Islamic Development Bank, Asian Development Bank, World Bank and from other international financial agencies. Bank advances those projects which (1) either earn foreign exchange by exports its products, or save foreign exchange by setting up industries of import substitution, (2) Utilizes locally produced machinery (3) and the units are set up in less developed areas of country. It also provides financial and technical advisory services to those projects, which are financed by it. It provides long and shortterm loans in local and in foreign currency for setting up new industrial units and for modernization of the existing old units. The loans are granted against the legal mortgage of land of the factory. It also provides working capital loans. Equity financing, lease financing, underwriting and bridge financing are its other modes of financing for the industries of country. It has provided loans facilities to the tune of Rs.26 Billion to over 1100 industries units.
4. I. C. P.Investment Corporation of Pakistan was established to increase the base of capital investment and the development of capital market of Pakistan. It actually has helped in the increase of industrialization in country. It remains in touch with other financial institutions and organizes consortium with them in order to secure maximum participation and to distribute the risk over many financial institutions. Its main functions are as under: -
1. Underwrites public issues of shares, provides finance in local currency by the purchase of TFC (Term Finance Certificates), and funds for the purchase of local machinery.
2. To broaden the base of share ownership it opens and maintains investment accounts.
3. It purchases and sells shares of the stock exchange in order to stabilize their prices in the Stock Exchange Market.
4. For small investors it floats Close-end Mutual Funds.
5. N. I. T.National Investment Trust through its Open-end Mutual Fund invests only in those projects, which give reasonable dividends. It mobilizes savings of general public and thus provides finances (through purchase of their shares) to companies and industrial undertakings. It operates in stock exchanges for releasing capital gains as well as to buy shares. It participates in syndicates along with other financial institutions and commercial banks to extend underwriting support to upcoming share issues and to sanction Term Finance Certificates to industrial projects for procurement of fixed assets. It sells its NIT Units. A layman due to his limited knowledge and skill cannot purchase profitable shares from stock exchange; he however can purchase NIT Units from the National Investment Trust. The Trust accumulates funds from general public and then purchases profit-providing shares from stock exchanges. Thus indirectly an investor becomes the shareholders of companies. NIT actually acts as agent on behalf of general public for the purchase of shares from the stock markets. Thus it not only increases savings but also provides finance for the development and progress of industrial sector.
6. S. B. F. C.Small Business Finance Corporation provides financial assistance to those people who are educated or skilled but are unemployed. They do not have necessary capital to do any business. The main purpose of this Corporation is to eliminate unemployment and to create opportunities for income of people, so that they may participate in increase of output and growth of economy. It also provides loan to Small scale and cottage industries of the country.
7. KHUSHALI BANKAround the globe micro-finance institutions is revolutionizing access to financial service to some of the poor and excluded segments of market and establishing a niche within financial services industry. Not only are these institutions reaching out to the majority of population especially in our part of the world but also their performance in terms of efficiency and productivity continues to improve. Pakistan continues to be at the forefront of these developments and the Microfinance sector Development Program of Government of Pakistan initiated some five years ago has had a profound impact on micro-finance sector in Pakistan through the establishment of a pro-poor market based formal financial sector oriented system. The new regulatory framework has facilitated the emergence of six licensed Micro-finance Institutions at district and national levels. Khushhali Bank is the lead micro-finance institution in Pakistan and has since its establishment in August 2000 rapidly expanding its micro credit and has well established its position as the largest micro finance bank in the country in terms of its clients and portfolio. This bank now serves 250,000 clients with cumulative disbursements of over Rs.6 billion through its branch network in 75 districts with high poverty incidence. The majority of Khushhali Banks clients are in rural areas and includes very poor and roughly one-third of beneficiaries being women.
8. Z. T. B. L. Zarai Taraqiate Bank Limited provides short-term, medium-term and long-term loans to farmers for agriculture, fisheries, forestry and agro-based industries. This is most important source of credit in agricultural sector, which meets all types of credit requirement of farmers, including agro-based cottage and small-scale industries. ZTBL has identified number of priority items i.e orchards, nurseries, production of improved seeds, oil seed crops, multi-cut-fodder, seed processing units, tube wells, production of tobacco, working capital for fruit grading, micro credit, seed processing units, tube wells, lift pumps, improvement of irrigation facilities, drip irrigation, mini dams, water desalination plants, animal breeding, green houses, on farm storage, and land developing, which contribute not only in development of agriculture sector but overall economy of the country. During 2005-06 loans of Rs2.210 billion have been disbursed for priority items. ZTBL bank accepts deposits as well in order to create savings habits amongst farmers. It receives loans from State Bank and International Development Agency. Foreign loan is used for mechanization of agriculture. The credit system of this bank is very easy. Two credit schemes known as “ Supervisory Credit Program” and “ Model Village Scheme” are very famous and popular. The credit needs of farmers are assessed at their farms and loan and machinery is provided in their villages after completing loan formalities. The other schemes of the bank are as under: -
(1) One window operation
(2) Farm mechanization
(3) Women Lending Program
(4) Small scale Enterprises
INDUSTRIAL FINANCIAL INSTITUTIONSMajor sources of industrial finance are as under: -
1. Commercial banks
2. Industrial Development bank of Pakistan
3. Pakistan Industrial Credits and Investment Corporation
4. Investment Corporation of Pakistan
5. National Investment Trust
6. Small Business Finance Corporation
7. Khushali Bank
8. Micro Finance Bank
SOURCES OF FINANCE FOR INDUSTRIES AND AGRICULTURE:
1. COMMERCIAL BANKSCommercial banks of Pakistan are making funds available for industrial projects. They are a major source of working- capital for industries covering purchases of short-term assets such as materials and components, financing of work in progress and the stockholding of final products. These banks are playing a dominant role in promoting economic development by mobilizing financial resources of the community and by making them flow into industrial progress and development.
2. I. D. B. P. Industrial Development Bank of Pakistan is playing a vital role in development and progress of private industrial sector. It provides long and short-term loans in local as well as in foreign currency for setting up new industrial units and for modernization of existing old units. Its local currency source of capital is its paid up capital and credits from Central Bank where-as it borrows foreign currency from Islamic Development Bank, Asian Development and from other international financial agencies. Bank advances loans to those projects which (1) either earn foreign exchange by exports its products, or save foreign exchange by setting up industries of import substitution, (2) Utilizes locally produced machinery (3) and the units are set up in less developed areas of the country. This bank has so far advanced loan facilities of Rs.24 Billion to about 6000 projects.
3. P. I. C. I. C. Pakistan Industrial Credit and Investment Corporation have a crucial role in the development of private industrial sector. Its local currency source of capital is its paid-up capital in which International Finance Corporation (IFC) has also contributed. The bank borrows foreign currency from Islamic Development Bank, Asian Development Bank, World Bank and from other international financial agencies. Bank advances those projects which (1) either earn foreign exchange by exports its products, or save foreign exchange by setting up industries of import substitution, (2) Utilizes locally produced machinery (3) and the units are set up in less developed areas of country. It also provides financial and technical advisory services to those projects, which are financed by it. It provides long and shortterm loans in local and in foreign currency for setting up new industrial units and for modernization of the existing old units. The loans are granted against the legal mortgage of land of the factory. It also provides working capital loans. Equity financing, lease financing, underwriting and bridge financing are its other modes of financing for the industries of country. It has provided loans facilities to the tune of Rs.26 Billion to over 1100 industries units.
4. I. C. P.Investment Corporation of Pakistan was established to increase the base of capital investment and the development of capital market of Pakistan. It actually has helped in the increase of industrialization in country. It remains in touch with other financial institutions and organizes consortium with them in order to secure maximum participation and to distribute the risk over many financial institutions. Its main functions are as under: -
1. Underwrites public issues of shares, provides finance in local currency by the purchase of TFC (Term Finance Certificates), and funds for the purchase of local machinery.
2. To broaden the base of share ownership it opens and maintains investment accounts.
3. It purchases and sells shares of the stock exchange in order to stabilize their prices in the Stock Exchange Market.
4. For small investors it floats Close-end Mutual Funds.
5. N. I. T.National Investment Trust through its Open-end Mutual Fund invests only in those projects, which give reasonable dividends. It mobilizes savings of general public and thus provides finances (through purchase of their shares) to companies and industrial undertakings. It operates in stock exchanges for releasing capital gains as well as to buy shares. It participates in syndicates along with other financial institutions and commercial banks to extend underwriting support to upcoming share issues and to sanction Term Finance Certificates to industrial projects for procurement of fixed assets. It sells its NIT Units. A layman due to his limited knowledge and skill cannot purchase profitable shares from stock exchange; he however can purchase NIT Units from the National Investment Trust. The Trust accumulates funds from general public and then purchases profit-providing shares from stock exchanges. Thus indirectly an investor becomes the shareholders of companies. NIT actually acts as agent on behalf of general public for the purchase of shares from the stock markets. Thus it not only increases savings but also provides finance for the development and progress of industrial sector.
6. S. B. F. C.Small Business Finance Corporation provides financial assistance to those people who are educated or skilled but are unemployed. They do not have necessary capital to do any business. The main purpose of this Corporation is to eliminate unemployment and to create opportunities for income of people, so that they may participate in increase of output and growth of economy. It also provides loan to Small scale and cottage industries of the country.
7. KHUSHALI BANKAround the globe micro-finance institutions is revolutionizing access to financial service to some of the poor and excluded segments of market and establishing a niche within financial services industry. Not only are these institutions reaching out to the majority of population especially in our part of the world but also their performance in terms of efficiency and productivity continues to improve. Pakistan continues to be at the forefront of these developments and the Microfinance sector Development Program of Government of Pakistan initiated some five years ago has had a profound impact on micro-finance sector in Pakistan through the establishment of a pro-poor market based formal financial sector oriented system. The new regulatory framework has facilitated the emergence of six licensed Micro-finance Institutions at district and national levels. Khushhali Bank is the lead micro-finance institution in Pakistan and has since its establishment in August 2000 rapidly expanding its micro credit and has well established its position as the largest micro finance bank in the country in terms of its clients and portfolio. This bank now serves 250,000 clients with cumulative disbursements of over Rs.6 billion through its branch network in 75 districts with high poverty incidence. The majority of Khushhali Banks clients are in rural areas and includes very poor and roughly one-third of beneficiaries being women.
8. Z. T. B. L. Zarai Taraqiate Bank Limited provides short-term, medium-term and long-term loans to farmers for agriculture, fisheries, forestry and agro-based industries. This is most important source of credit in agricultural sector, which meets all types of credit requirement of farmers, including agro-based cottage and small-scale industries. ZTBL has identified number of priority items i.e orchards, nurseries, production of improved seeds, oil seed crops, multi-cut-fodder, seed processing units, tube wells, production of tobacco, working capital for fruit grading, micro credit, seed processing units, tube wells, lift pumps, improvement of irrigation facilities, drip irrigation, mini dams, water desalination plants, animal breeding, green houses, on farm storage, and land developing, which contribute not only in development of agriculture sector but overall economy of the country. During 2005-06 loans of Rs2.210 billion have been disbursed for priority items. ZTBL bank accepts deposits as well in order to create savings habits amongst farmers. It receives loans from State Bank and International Development Agency. Foreign loan is used for mechanization of agriculture. The credit system of this bank is very easy. Two credit schemes known as “ Supervisory Credit Program” and “ Model Village Scheme” are very famous and popular. The credit needs of farmers are assessed at their farms and loan and machinery is provided in their villages after completing loan formalities. The other schemes of the bank are as under: -
(1) One window operation
(2) Farm mechanization
(3) Women Lending Program
(4) Small scale Enterprises