Loan demand drops in Q1

November 13, 2024 (MLN): Demand for loans decreased in the first quarter of fiscal year 2024-25 compared to the previous quarter, while it increased over the corresponding quarter of the previous year.

The Bank Lending Survey (BLS) for Q1-FY25 conducted by the State Bank of Pakistan showed that there are various factors affecting overall demand for loans.

Inventories and working capital needs contributed negatively while all other factors were on positive side.

Monetary policy decisions made a substantial positive contribution. Contribution of general economic activity improved significantly but remained within the negative zone (<50) during Q1-FY25 over Q4-FY24.

Moreover, seasonal effects, fixed investment needs and security condition also exhibited increase in demand when compared to previous quarter.

While analyzing sector-wise demand for loans on QoQ basis, the highest decrease was observed in the Agriculture sector followed by SME and corporate sectors.

On the other hand, the demand of consumers improved.

On YoY basis, all sectors exhibited positive contribution in the demand for loans in Q1- FY25.

The number of loan applications decreased in the current quarter when compared to the previous quarter. However, the respondents expect an increase in the number of loan applications during the next quarter.

The overall cost of borrowing decreased from the previous quarter. The cost of borrowing decreased significantly on Year-on-Year (YoY) basis. Similarly, the respondents expect the cost of borrowing to decrease in the next quarter.

Overall availability of funds increased in Q1-FY25 on QoQ. The respondents expect an increase in the availability of funds during the next quarter.

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