[dropcap]T[/dropcap]he significant challenges for Pakistan are scarcity of resources, poverty, and health issues etc. If it is to become a major player in addressing financial inclusion and poverty, following critical sectors in Pakistan’s economy must play a significant role in job creation and poverty reduction. Moreover in this regard, for sustainable community and for social development of the country, one must take the Corporate Social Responsibility (CSR) the central part for the economic and welfare integrity of the country’s institutions and organization and as well as for the companies strength.
AGRICULTURE
Pakistan has one of the world’s most impressive agricultural systems but the arrangement has not fighting fit. Agriculture could become the main driver of economic growth and poverty alleviation but for that to happen policymakers at the federal level as well as in the provinces will have to appreciate the sector’s potential as well as devise public policies to realize its potential. From about the late nineteenth century to the present, the state has had a heavy hand in guiding agriculture to produce for the market.
Recently, through the acquisition of Engro Foods by Dutch company Friesland Campina for US$460 million, we may expect the Corporate Social Responsibility (CSR) activities (community development) initiated by Engro to continue with greater commitment.
FINANCIAL INCLUSION
In recent years, financial inclusion is one area where stakeholders of the financial ecosystem have been focusing lately as part of a broader strategy to reduce poverty, encourage economic development, and promote stability and security. Access to financing is now widely acknowledged as a path to meaningful economic inclusion and reduction in poverty.
On a macroeconomic level, financial inclusion is linked to economic and social development, and improvements in financial access have been shown to contribute to reductions in extreme poverty and wealth inequality. Major constraints to financial access, in spite of policy reforms, arise from the high levels of poverty, combined with low awareness and information about available financial services, as well as gender bias.
The advent of Information and Communication Technology (ICT) in Pakistan has seen Norway’s telecom giant, Telenor partner with various financial institutions resulting in pioneering branchless banking through Easypaisa in Pakistan.
REAL ESTATE
Real estate market is crucial for promoting commerce and industry, growth and employment, and poverty reduction. The liberalization of the Pakistani economy has increased business opportunities and migration of the labor force to urban localities has led to an increase in the demand for both commercial and housing space. In this connection, the name of UAE based Emaar is worthy of mention.
BANKING INDUSTRY
The extension of credit to remittance clients by banks or other FIs has extraordinary development potential. As remittance clients begin using formal financial systems, they establish rapports with FIs and build credit histories. Banks who have built significant professional relationships with remittance clients are more likely to extend credit, which is crucial to several development-related purposes, from poverty alleviation to business development. The most common forms of credit include that for the purchase of housing or land, personal lending for small-to-medium purchases, and business lending, either to start or to invest in a business. The lending can be unsecured, typically for smaller amounts up to Rs500,000 to Rs1,000,000, or may require a guarantee, which is often a property, or less commonly a guarantor who co-signs the loan.
With the slogan of “Here for good”, presently Standard Chartered Bank is the only foreign bank in Pakistan with branches in El Salvador where TechnoServe-MFIC successfully implemented the above model.
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ISLAMIC BANKING
As a system, Islamic finance facilitates in stimulating economic activity and entrepreneurship towards promoting comprehensive human development and addressing poverty and inequality. High unemployment, poverty, and low levels of financial access in Muslim countries continue to create high demand for microfinance.
While conventional microfinance has successfully reached large numbers of poor in Muslim countries (most notably, Bangladesh and Indonesia), there is evidence to suggest that there are many potential clients of microfinance that categorically reject products that do not comply with Islamic principles. Approximately 44 percent conventional microfinance clients worldwide reside in Muslim countries so by giving the right vision of Islamic Microfinance to them we can attract large number of donors from all over the world.
Muslims and non-Muslims alike could take the edge from the Islamic microfinance for the social sustainability worldwide. Presently, UAE based Dubai Islamic Bank is one of the few Islamic banks in Pakistan that is offering a variety of products to cater to the needs of banked segment as well as the marginalized population of our society.
SMALL & MEDIUM ENTERPRISES
In view of the critical importance of SMEs in low-cost job creation and poverty reduction, successive governments have tried in the past to focus on their development, but the sector remains uncompetitive in world markets owing to structural weakness, obsolete technology, lack of access to credit and marketing and management skills, unfriendly business and regulatory environment, and other factors, despite various initiatives taken both at the federal and provincial levels.
Venture Capital can be an effective option for start-up businesses. However, to establish this market some significant steps are required to encourage domestic and foreign investors for the establishment of Fund Management Company (FMC). These steps may include the reduction in the capital requirement for the establishment of FMC, issuance of contract for longer term and establishment of secondary markets, etc. Some notable companies that have helped foster entrepreneurship in Pakistan are Accenture, IBM, MIT and Orix etc.
TRAINING & DEVELOPMENT
One of the key strengths of Pakistan is the demographic bulge especially growing proportion of young adults unlike some of the developed countries which are having increasing proportion of aged citizens.
Pakistan has capacity to send across large number of young unskilled and semi-skilled people. Having over 30 million plus population in the age group of 25-35, Pakistan can put this valuable asset for the good of the country by imparting training in different technical fields to respond market needs abroad. Initiatives like AmanTech, TEVTA (Technical Education and Vocational Training Authority) & GPATI (German-Pakistan Training Initiative) have been made possible through collaboration and cooperation from Germany.
[box type=”info” align=”” class=”” width=””]The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan[/box]