PESHAWAR: A United Nations Development Programme report about access to finance for private sector in merged districts has declared that access to formal financial services in the region was one of the lowest in the country.

Access to Finance for Private Sector Development in the Merged Areas which has been prepared in collaboration between the the Khyber Pakhtunkhwa government and United Nations Development Programme’s (UNDP) Merged Areas Governance Project (MAGP) was launched here on Thursday.

The reported noted that there were a total of 81 bank branches across the seven districts of merged districts, making the total branches in the region amounting to less than 5 per cent of all branches in KP.

The report said that additional impediment in attracting private investment and building credit history is the informal nature of small and medium enterprises (SMEs), as they were largely remained undocumented. As of December 2020, the total individual loans in MA (Rs594 million) were more than twice as much as private sector loans (Rs219 million).

It said that microfinance had only recently started to gain steam and average loan sizes remain small. “Although microfinance can contribute to the development of private sector at a certain scale, it cannot be billed as a comprehensive solution to the challenge of limited access to finance in the merged areas,” it said, adding that  agricultural credit was also restricted and largely concentrated in districts of Kurram and Bajaur. The total outstanding agricultural loans in MA account for less than 1 per cent of the total disbursement in KP.

The MAGP Senior Sector Specialist for Small Enterprises Ahmad Umair recommended expanding existing loan schemes by the government such as Kamyab Jawan and Insaf Rozgar. “There is a need to review criteria and relax minimum educational standards for credit services for youth of the MA,” he said, adding that the youth couldn’t complete their education during the years 2002 and 2015 as instability and security turmoil rocked the region. “Lack of education is acting as a major impediment in their entrepreneurial journey.”

MAGP Programme Manager Raluca Eddon reiterated UNDP’s commitment in supporting the KP government in continued integration and development of the MA. She called for an active involvement of all stakeholders, including the government, development partners and the private sector to support the banking sector in ensuring widespread access to finance, especially for women and vulnerable groups. “By increasing reach of existing loan schemes and microfinance, introducing targeted financial products, and facilitating access to credit information, we can propel the development of a conducive business environment and help local businesses grow.”

In his closing remarks, the Secretary Industries KP Humayun Khan highlighted the need to partner with other stakeholders such as the State Bank, the Securities and Exchange Commission and other financial institutions to foster increased access to financing and regulatory support to local businesses. He said, “The findings of this report are highly beneficial to develop private sector in the merged areas. Post-merger, we devised a ten-year-long Tribal Decade Strategy and set aside the first three years to focus on various interventions. In the coming seven years, we aim to concentrate on improving access to finance and bank lending in the region.”

 

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