BANKING activities in a particular region flourish on the back of its economic strength and the presence of banks there helps boost the economy of that region. Balochistan, comprising almost 44 per cent land area of Pakistan and rich with mineral resources, offers enough potential for economic growth but most of it is yet to be exploited. That is why banks do have a small presence there but expansion in their branch networks in the province is slower than in the other three provinces.

At the end of June 2004, there were only 88 branches of 28 local banks operating in Quetta, which constituted only 1.3 per cent of their total branches—6,803 in number.

As for foreign banks, only one of a total of 11 — Standard Chartered — had a presence in the province with a single branch in Quetta. At end-June 2004, all foreign banks combined were operating 79 branches throughout Pakistan; most of them located in Karachi.

Provincial spread of branch networks of all banks at end-June 2004 is not available. But older data show that the number of bank branches in the entire Balochistan was 267, or 3.9 per cent of the total 6915 branches operating across Pakistan at end-June 2003.

With just 1.3 per cent of the total branch network of all local banks, Quetta seems to be under-banked. Similarly, with 3.9 per cent of total bank branches, the entire province of Balochistan also looks under serviced.

But as the province is home for only five per cent of Pakistan’s total population with nominal economic activity, banking coverage in Balochistan is hardly wanting in real terms.

The issue, however, is that whatever banking is done in Balochistan, it caters to the needs of a small number of high-profile individuals and businesses and banks need to look for newer areas to expand their operations. Balochistan has a negligible industrial base and its services sector hardly exists. But the agricultural sector is noticeable, though not very large, and the province produces exportable surplus of fruits like dates and apples. Livestock, a sub-sector of agriculture, also thrives at times when there are enough rains.

Main economic activity, however, is trading, interlinked heavily with smuggling to and from Iran and Afghanistan. Parts of Balochistan are also home to contractors of mega projects of the government as well as of the private sector. Mining is a major potential area of activity but it is under-exploited.

The province not only produces natural gas for the entire country but is also known for large, though not fully exploited, deposits of copper, coal, marble and limestone etc. The revival of the much-neglected Saindak project has raised hopes that the production of copper and gold will lift Balochistan’s economy.

Development projects like construction of highways initiated to appease angry Balochs fighting for their due share in Pakistan’s economic pie also offer big opportunities for the banking business in Balochistan.

The multi-million dollar Gwadar Port Project that has kicked up a controversy between local tribal chiefs and the federal government over the share of local people in the project will also give a boost to economic activity when it becomes operational.

That should, in turn, broaden the base for banking activity not only in Gwadar but also in the entire province. Even at end-June 2003, five major local banks, one private bank and the Zarai Taraqiati Bank Ltd were operating 15 branches in district Gwadar, of which 7 were located in Gwadar proper and remaining 8 elsewhere in the district.

(See Table I for district-wise break-up of 267 bank branches operating in Balochistan in June 2003).

Provincial break-up of the data on overall bank lending and deposit mobilization could not be obtained, but statistics on provincial break-up of agricultural credit disbursement provide some clues on the state of affairs. These statistics show that in fiscal years 2001-02 and 2002-03, Balochistan received Rs288 million and Rs213 million worth of farm credit respectively from five major commercial banks namely National Bank, Habib Bank, United Bank, Muslim Commercial Bank and Allied Bank. In addition to that the province also received Rs493 million and Rs381 million agricultural credit in fiscal years 2001-02 and 2002-03 from Zarai Taraqiati (Agricultural Development) Bank Ltd.

Agricultural lending of Rs288 million and Rs213 million by five major commercial banks in 2001-02 and 2002-03 are insignificant when compared to overall agricultural lending of Rs17.4 billion and Rs22.6 billion respectively in these two years. But even at these levels, agricultural lending in Balochistan in these two fiscal years was much higher than in the previous years. The province had received more than a hundred million rupees agricultural loan more than a decade ago — in fiscal year July-June 1990-91.

In the following years, it received agricultural loans worth less than a hundred million rupees — the largest Rs63.6 million in 1992-93 and the tiniest Rs13.4 million in 1996-97.

Agricultural lending by ZTBL to Balochistan of Rs493 million and Rs381 million in fiscal years 2001-02 and 2002-03 also formed a negligible percentage of its overall agricultural lending of Rs28.8 billion and Rs29.1 billion across Pakistan.

Besides, the annual ZTBL’s agricultural lending to Balochistan in these two years was far lower than in the previous years. In 1998-99, the province had received its highest-ever share of Rs1.324 billion in agricultural credit offered by ZTBL (then ADBP) and in subsequent two years it had received Rs716 million and Rs493 million respectively.