News: ‘Economic Reporting on Financial Development Index’ workshop
Ripe time for development of debt capital market: SECP
Publication: Daily Times
Date; October 26, 2012
Web Address:- http://www.dailytimes.com.pk/default.asp?page=2012\10\26\story_26-10-2012_pg5_6
‘Economic Reporting on Financial Development Index’ workshop
Ripe time for development of debt capital market: SECP
* Chairman says time ripe as banks paying 5 percent profits and charging 15 percent interest from their borrowers
ISLAMABAD: Securities and Exchange Commission of Pakistan (SECP) Chairman Muhammad Ali here on Friday said that this is the ripe time for development of debt capital market in the country as the banks are paying 5.0 percent profits and charging 15 percent interest from their borrowers.
He said this while addressing the participants of a workshop ‘Economic Reporting on Financial Development Index’, organised by the SECP here Thursday. AGAHI and CIME were the collaborating partners for the event.
Some 90 percent of the financial assets are with the banks and central directorate of national savings with maximum return at 10 percent as against 30 percent return in investment in stock market, it’s time that State Bank of Pakistan, Ministry of Finance and SECP come forward and develop the debt capital market in the country.
In the rest of the world deposits with banks and other savings instruments are 1.0 percent to 2.0 percent and investors like to invest their funds in stock market. Investment in Pakistan’s stock market would help availability of capital for the industrial sector and would help achieve rapid industrialisation and job creation in the country. He informed, “We have been able to develop stock market in the country during the last six decades and are required to promote corporatisation culture in the country,” he added. Small and Medium Enterprises (SMEs) for the development of small and medium-sized companies are also required to be established and risk profiling of these SMEs is needed to be prepared.
Briefing the journalists on financial market reforms and regulatory framework of the SECP, Ali said that the SECP is busy in establishing high standard of governance across the capital market to cement investors’ confidence.
Ali said that in past the government’s attitude was not to allow small and medium-sized companies and risky ventures, which resulted in accumulation of assets with banks and national savings. He pointed out that in Pakistan, banking sector and national savings have 90 percent of total assets of the financial sector. Oftentimes, entrepreneurs are not entertained by our banking –centric financial system and it is not possible to generate money from other sources.
In a bid to enhance access to finance and develop a debt capital market, the SECP has introduced various new concepts like SME exchanges, pension schemes, micro-insurance for crops and livestock and commodity trading facility to mutual funds, where the small investors could utilise their savings.
He emphasised the need for raising people awareness and education regarding capital market and mentioned that during the last one decade the return percentage was 20 percent in gold and it was 30 percent for investment made in stock market. The other areas, where the SECP has been focusing on are access to capital, widening of product portfolio in stock exchanges, good governance and reforms and improving the standards of human resources of capital market.
The SECP chairman said that the capital market needs infrastructure development through provision of strong distribution networks. In Pakistan, financial inclusion (financial literacy), one of the lowest in the region, is only 14 percent in comparison with Bangladesh 30 percent, India with 45 percent and Sri Lanka 60 percent. In terms of distribution, we have less than 200,000 investors, like, 0.1 percent of our total population. Of these, 80 percent reside in Karachi, Lahore and Islamabad. Asset Management Companies (AMCs) and brokers have less than 200 branches nationwide, while in contrast, the National Stock Exchange (NSE) in India has presence in 3,150 cities, AMC’s and brokers have 34,000 branches and around 250,000 access points are available to investors. We intend to encourage the introduction of a sub-broker regime, and to capitalise on automation technologies, including mobile phones and the Internet, he added.
The SECP has revived the Corporate Law Review Commission (CLRC) to draft a new company law to modernise and reform the existing regime of the regulation of corporate sector. The CLRC is working to finalise the draft of the new company law for Pakistan by September next year for public consultation and subsequent approval from the parliament. The Securities Bill, pending with the parliament since October 2011, was introduced with a view to bring about much needed structural and legal reforms in the capital markets, the SECP chairman added.
Mishal CEO Amir Jhangir briefed the participants about the procedure adopted by the World Economic Forum (WEF) to put in place Financial Development Index. Jhangir said that the index assembles a vast amount of data to create an assessment of the different aspects of complex financial systems, including the institutional environment, the business environment, financial stability, banks, capital markets, and overall capital availability and access.
Senior journalist Amir Zia encouraged the journalists to use social media to report their news. He said that the Pakistan has lost its position in World Financial Index and journalists should report on reasons that are contributing to decline in Pakistan’s ranking in Global Financial Index.
The interactive session covered various subjects including editorial balance and content evaluation, scope of business reporting in Pakistan and economic reforms.
Recently, the Global Competitiveness Report 2012-13 issued by the WEF has appreciated the performance of the SECP as the commission has been ranked 55th in 2012-13, as compared to 70th in 2011-12. sajid chaudhry