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Who gets the bank loans

In 1964, Pakistani banks made out 0.57 million loans to the tune of Rs 5.5 billion. Of these, loans up to Rs 40,000 accounted for 98% of the number of loans but 18.9% of the total advances. The loans of Rs 1 million and above claimed 50% of total advances. Only 40% advances of Rs 10 million and above were made but they claimed 21% share of the entire credit created by the banks.

According to State Bank annual report, total advances made by the bank in 1990 were estimated at Rs 230 billion, advances up to Rs 40,000 had 10% of the share, loans of Rs one million and above had 72% share while only 1200 persons received loans of Rs 10 million and above, with a 48% stake of the entire cake, by receiving Rs 110 billion in loan.

It is evident from the above figures tha monopoly on credit deteriorated in the 20 years of post nationalization. Ironically this deterioration continues, despite the candle-lit dinner speeches by the Governor State Bank of Pakistan, Dr Mohammad Yaqub in 5-star hotel of Karachi and Lahore about the credit needs of " the small men, small business and small cities".

But who are the 1,200 people who borrow loans of Rs 10 million and more, or Rs 120 billion per annum from the entire banking system and for what purpose these loans were used? It is not difficult to attempt the answer, thanks largely to the tales of corruption told from political rooftops during last ten years and the lists of defaulters published in 1993 and 1996.

Beginning of Bad Loans

Bhutto's nationalization has often been dubbed as the bureaucratization of banks and industries that gave birth to a breed of bureaucrats and politicians in business, and businessmen in politics. It is these two in one bureaucrats, politicians and businessmen who plundered Pakistan's banking in post-Bhutto era and led the economy to present state of near collapse.

One frequently hears the lament that Pakistan would have been the second Japan or an Asian tiger, " had Z A Bhutto not happened to Pakistan". But a country on way to becoming the tiger earned the nomenclature of " a failed state" in such a short span, not merely because of nationalization but for host of indulgences by successive govts in recent past who had the historic opportunity to put things on track but instead have brought forward the day of reckoning by their misdeeds.

The White paper on economy under Bhutto, released by General Zia ul Haq in 1979 had estimated that bad loans of Rs half million and above amounted to Rs 1,340 million including Rs 830 million of pre-nationalization era. In order to have a better perspective of who plundered the nationalized commercial banks and how, it is appropriate to reproduce the indictment of Z A Bhutto about the misuse of the banks, in White paper.

It said " the aggregate amount of advances of half million rupees and above which were classified as doubtful or irregular in the State Bank Inspection Report of December 31, 1975 is over Rs 1,340 million. Advances of half million rupees or above given by the banks after nationalization which have been found to be bad, doubtful or irregular abinitio amounted to Rs 510 million". It also found that nationalized commercial banks sanctioned loans worth Rs 562 million under irresistible political and administrative pressure or influence between 1974-77 and major political beneficiaries included Jam Sadiq Ali, Abdullah Shah, Syed Qaim Ali Shah, Makhdoom Talibul Maula and Mir Aijaz Ali Khan Talpur.

Few years later, Zia ul Haq himself was accused by Benazir Bhutto of writing off loans and patronizing the gang of four (The Ittefaq group, The Chaudhries of Gujrat, Saifullahs and Basharat Elahi) who had allegedly monopolized the ban credit by securing loans worth Rs 19,200 million. In her speeches and press conferences Benazir vowed to recover the written off loans but when she came into power in 1988 and had the opportunity to do so, she herself indulged in a bonanza of writing off and rescheduling loans on an unprecedented scale.

The loans bonanza:

Three lists of bad loans have been published since 1993, the first published by caretaker Prime Minister Moeen Qureshi, followed by two lists released by Benazir Bhutto and caretaker govt of Meraj Khalid, in October 1996 and January 1997 respectively. The bad loans which were Rs 1,340 million when Z A Bhutto was removed swelled to Rs 80 billion in August 1993, Rs 126 billion in November 1996 and Rs 130 billion in January 1997.

The August 1993 list, published by Moeen Qureshi carried details of 244 written-off loans amounting to Rs 4,724 million between March 1985 and August 1993 but the number of written-off loans increased 942 in November 1996 valued at Rs 8,247 million, according to the list published by Meraj Khalid. Thus during her second term, Benazir govt wrote-off 698 loans worth Rs 3,550 million. The details of written-off published by Moeen Qureshi took two pages of August 29 issue of daily Dawn but three years later the same newspaper devoted 18 pages to cover the details of the written-off loans.

Some notable beneficiaries of loans written-off before August 1993 included New Era Textile (RS 136.7 million), Hashwani Hotels (Rs 120 million), Fancy (Rs 64.89 million), Colony (Rs 51.4 million), Saifullahs (Rs 39.21 million), Hyesons (Rs 35.7 million), Habib group against RKD Sugar (17.5 million), Saigol against Omaryar Limited and Kohinoor Textile Mills (17.1 million), Mian Mansha (Rs 7.5 million), Bibojee (Rs 4.2 million), Packages (Rs 4.2 million) and Bawany (Rs 2 million).

The 698 beneficiaries of written-off loans under Benazir included Farooq A Sheikh, Chairman, PFCCI Committee for revival of Sick Indusrties whose five loans worth Rs 500 million in Adamjee Industries, Dost Mohammad Textile Mills, United Exports and United Group of Industries were writtn-off. Six loans worth 131 million of Jan Mohammad, a member of the National Group owning the Muslim Commercial Bank, relating to Charsada Sugar Mills were written-off. A few other beneficiaries were Saifullahs, Hashwani, House of Habib, B.D Avari, Taufiq Sayed Saigol, a member of the National Assembly Shahid Nazir and former speaker of the National Assembly Gohar Ayub.

Pakistan's top defaulters

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How they make MONEY

Robber Barons of Pakistan