KARACHI – Pakistani businesses are increasingly avoiding bank loans despite lower interest rates, as commercial banks continue to prioritize lending to the government. This shift has created growing concerns over the availability of credit for the private sector, particularly small and medium-sized enterprises.
According to recent data from the State Bank of Pakistan, private sector borrowing has seen a sharp decline, with outstanding loans dropping significantly in the past few months. Analysts point out that banks prefer investing in government securities, which offer higher returns with minimal risk, rather than extending credit to businesses.
The reluctance to lend has hit small and medium enterprises the hardest. Experts argue that lending remains heavily concentrated among a handful of large corporations, while newer or asset-light businesses struggle to secure financing due to rigid collateral requirements. Many banks still demand physical assets such as land or machinery as security, leaving out companies that primarily operate with receivables or inventories.
Economists warn that the credit gap could undermine Pakistan’s economic recovery by slowing down private investment and job creation. Unless structural reforms are introduced to expand credit access and incentivize banks to finance productive sectors, business growth will remain constrained.
This story has been reported by PakTribune. All rights reserved.