LAHORE- (24th - march 2004): (Asian Development Bank will help increase access to credit for agriculture and small and medium enterprises in Pakistan by strengthening secured transactions, through a technical assistance (TA) grant of US$500,000.Through extensive consultations, the TA will help develop a legal framework to strengthen and expand the use of collateral in securing financial transactions. The framework will facilitate the creation, perfection, and enforcement of collateral, and allow a wider range of assets to be used as collateral, says Mr. Ashok Sharma, an ADB Senior Financial Economist.It will also design a modern registration system to cover all security interests, irrespective of their legal form. Reducing risk through an effective secured transaction regime can lower lending rates and increase the supply of credit. Such reform could be a key to generating jobs and reducing poverty.

The time, cost and uncertainty in establishing claims to collateral, prioritising claims, and publicising the ranking of priorities at secured transactions in Pakistan. Access to credit is also limited by the under utilisation of movable property, such as tractors and grain, as collateral. These restrict farmers and small and medium size enterprises, most of which are engaged in trade and services, with most of their assets in receivables and inventories.

As the economy moves into the digital age, a secured transaction regime for movable has become a priority. The value of new economy enterprises is typically based on intangibles such as patents, copyrights, brand names, and software codes, Mr. Sharma noted.

Low repayment of rural credit because of the lack of an effective mechanism for repossession of collateral also hinders the development of the rural credit market. Banks meet less than one-fifth of the potential rural credit demand. The TA supports ongoing agriculture, micro-finance, rural finance, and SME sector reforms in Pakistan backed by ADB.

The Ministry of Finance is the executing agency for the TA, which will be carried out over 15 months to June 2005. The government will contribute US$125,000 equivalent toward the TA's total cost of US$625,000.

The Government of Pakistan's sustained commitment to structural reforms has contributed to economic growth during the fiscal year 2003 at a pace not seen in the last 6 years. Agriculture, manufacturing, and services all recorded higher growth. This growth has set the stage for deepening the ongoing reforms to consolidate the gains and initiate second generation reforms, including in the priority sectors of agriculture and small and medium enterprises (SMEs) where access to affordable and adequate credit is still one of the main constraints.

To supplement the ongoing Asian Development Bank (ADB) assistance for agriculture, micro-finance, rural finance, and SME sector reforms, the Country Strategy and Programme (2002-2006) includes an advisory technical assistance (TA) grant.

Pakissan fourm