Industrial Development Bank of Pakistan

Industrial Development Bank of Pakistan (IDBP) is a Pakistani state-owned development bank headquartered in Karachi. It was created in 1961 by transforming the Pakistan Industrial Finance Corporation (PIFCO), an earlier industrial-finance institution established in 1949. The institution was designed to address limitations in Pakistan’s existing credit system and to provide more accessible financing for medium-sized industries, new industrial ventures, and projects in less-developed regions. IDBP’s creation followed the recommendations of a Credit Enquiry Commission convened in 1959. PIFCO had concentrated largely on loans above Rs. 1 million and on enterprises that were already operating. That model provided support to established sectors but offered limited assistance to new businesses, smaller industrial concerns, and projects whose principal assets were prospective rather than already in existence. The proposed successor was therefore given a broader development mandate, including smaller lending limits, short-term industrial credit, financing against prospective assets, and access to foreign-exchange resources. The bank inherited PIFCO’s assets and liabilities under the Industrial Development Bank of Pakistan Ordinance. Its initial share capital was Rs. 30 million, with the federal government required to hold at least 51 percent. The original lending ceiling was Rs. 1 million for limited companies and Rs. 0.5 million for other enterprises, although some sectors, including mining and inland transport, were treated differently. These limits were later increased, with foreign-exchange loans subject to a separate ceiling. Over time, IDBP’s role expanded beyond conventional industrial lending. Its development-banking activities included guarantees and medium- and long-term finance. It also conducted commercial-banking functions such as deposits, bills, foreign-exchange accounts, letters of credit, remittances, guarantees, and short-term advances. Its merchant-banking services included bridge financing, leasing, and underwriting public share issues. The bank also collected selected utility bills, participated in equity investment and trading, and administered the Equity Participation Fund. Although initially associated with industrial finance generally, IDBP increasingly emphasized small and medium-sized enterprises and projects in rural or economically less-developed parts of Pakistan. Its branch network extended across major urban centers and regional locations, including Karachi, Hyderabad, Larkana, Islamabad, Rawalpindi, Faisalabad, Lahore, Multan, Abbottabad, Peshawar, Quetta, Gilgit, and Mirpur in Azad Kashmir. The institution later experienced severe financial stress linked to loan defaults. By the mid-2000s, its accumulated losses were reported at approximately Rs. 27 billion and it was described as insolvent. In 2006, the Pakistani government merged IDBP with the profitable Investment Corporation of Pakistan in an effort that was partly intended to improve its financial position. The accumulated deficit was nevertheless reported to have increased to approximately Rs. 28 billion by the end of 2009, while the government continued examining ways to make the institution economically viable. IDBP is owned through Pakistani public-sector entities. The reported shareholding pattern allocated 57 percent to the federal government, 36 percent to the State Bank of Pakistan, and the remaining 7 percent to provincial governments and other public-sector corporations. Its board was described as including private-sector representatives appointed by the Ministry of Finance. The available reference material does not establish a definitive current operating status, corporate successor structure, or current official website, so those details remain unresolved.

The institutional predecessor of IDBP was the Pakistan Industrial Finance Corporation, founded in February 1949 with share capital of Rs. 20 million. The central government supplied 51 percent of that capital, while institutional and individual investors supplied a substantial additional share. During its twelve-year existence, PIFCO provided approximately Rs. 293 million in financial assistance. About 56 percent went to the jute and cotton industries, while the balance supported a range of other sectors, including shipping, cement, and glass. PIFCO’s operating model was considered too narrow for Pakistan’s changing industrial and economic requirements. It generally focused on loans above Rs. 1 million and primarily supported existing enterprises. As a result, it had limited capacity to finance new industrial ventures, smaller businesses, and projects whose assets were expected to be created in the future. These limitations contributed to the establishment of the Credit Enquiry Commission in 1959. The commission recommended converting PIFCO into a broader institution focused on medium-scale industry. Its proposals included a lower lending threshold, short-term industrial credit, lending against prospective assets, and the provision of foreign-exchange resources. The recommendations were implemented through the Industrial Development Bank of Pakistan Ordinance. IDBP was established on July 29, 1961, and began operating in the early 1960s, inheriting PIFCO’s assets and liabilities. The new bank initially had share capital of Rs. 30 million. The federal government was required to retain at least 51 percent ownership. Its initial lending ceiling was Rs. 1 million for limited companies and Rs. 0.5 million for other forms of enterprise, with special treatment for sectors such as mining and inland transport. Later adjustments raised the general lending ceiling to Rs. 2.5 million and set a foreign-exchange lending limit of Rs. 1.5 million. IDBP’s early lending included assistance to existing small industries and new industrial units identified in the government’s Small Industries Investment Schedule issued in November 1960. Its longer-term development role became increasingly associated with small and medium-sized enterprises and with industrial expansion in rural and less-developed areas of Pakistan. The bank operated across several lines of business. In development banking, it provided guarantees and medium- and long-term finance. In commercial banking, it handled deposits, bills, foreign-exchange accounts, letters of credit, guarantees, remittances, and short-term advances. Merchant-banking activities included bridge financing, leasing, and underwriting public offerings. The institution also collected selected utility bills, participated in equity investment and trading, and administered the Equity Participation Fund. IDBP later encountered serious financial difficulties, particularly as loan defaults generated large losses. By the middle of the 2000s, reported accumulated losses were around Rs. 27 billion and the bank was described as insolvent. In 2006, the government merged it with the Investment Corporation of Pakistan, which was profitable, partly as a measure to improve IDBP’s financial position. The accumulated deficit was subsequently reported at approximately Rs. 28 billion by the end of 2009. The government continued to explore methods of making the institution economically viable. The reported ownership structure consisted entirely of Pakistani public-sector entities: 57 percent held by the federal government, 36 percent by the State Bank of Pakistan, and 7 percent by provincial governments and other public-sector corporations. The board was described as including private-sector representatives appointed by the Ministry of Finance. The available reference material does not provide a conclusive account of the bank’s present legal status, successor arrangements, or current operations.

• 2009

  Accumulated deficit reported at approximately Rs. 28 billion

  [1]Industrial Development Bank of Pakistanen.wikipedia.org

  Reference material reports that the bank’s accumulated deficit had increased to about Rs. 28 billion by the end of the year.

• 2006

  Merger with the Investment Corporation of Pakistan

  [1]Industrial Development Bank of Pakistanen.wikipedia.org

  The government merges IDBP with the profitable Investment Corporation of Pakistan, partly to address IDBP’s financial difficulties.

• 1961

  Industrial Development Bank of Pakistan is created

  [1]Industrial Development Bank of Pakistanen.wikipedia.org

  IDBP is established on July 29 through the transformation of PIFCO and inherits its assets and liabilities.

• 1961

  Small Industries Investment Schedule supports new units

  [1]Industrial Development Bank of Pakistanen.wikipedia.org

  The bank begins extending credit to small industries and new industrial units identified under the government’s investment schedule.

• 1959

  Credit Enquiry Commission convenes

  [1]Industrial Development Bank of Pakistanen.wikipedia.org

  A commission examines weaknesses in Pakistan’s industrial-credit system and recommends a broader institution for medium-scale and new industrial ventures.

• 1949

  Pakistan Industrial Finance Corporation is founded

  [1]Industrial Development Bank of Pakistanen.wikipedia.org

  PIFCO is established with Rs. 20 million in share capital to provide industrial finance in Pakistan.

A public-policy development-finance institution supporting Pakistani industry, small and medium-sized enterprises, and investment in rural or less-developed regions.

• Development banking · 1961

  Industrial project finance

  Medium- and long-term financing for industrial projects formed the bank’s core development-banking activity. The institution was created partly to support new ventures and to lend against prospective assets, rather than limiting credit to established enterprises with existing collateral. Its mandate covered industrial expansion and projects in sectors and regions that conventional commercial finance might not adequately serve.

• Industrial lending · 1961

  Small and medium-sized enterprise loans

  IDBP provided financing to small industries and medium-sized enterprises, including new units identified through government industrial-investment planning. Over time, SME support became an important part of the bank’s development role, particularly in rural and less-developed areas of Pakistan.

• Trade and commercial banking

  Guarantees and letters of credit

  The bank’s commercial and development-banking services included guarantees and letters of credit. These instruments supported industrial procurement, trade transactions, and the financial obligations of borrowing enterprises.

• Foreign-exchange banking · 1961

  Foreign-exchange finance

  Foreign-exchange resources were included in the proposed mandate for the institution that became IDBP. The bank subsequently offered foreign-exchange accounts and foreign-exchange loans, subject to lending limits established under its development-finance framework.

• Merchant banking

  Merchant-banking services

  IDBP’s merchant-banking activities included bridge financing, leasing, and underwriting public issues of shares. These services extended the institution beyond conventional term lending and allowed it to participate in corporate and capital-market financing.

• Banking services

  Utility-bill collection

  The branch network collected selected utility bills. Gas-bill collection was reported at branches in Karachi, while telephone-bill collection was available through all branches listed in the reference material.

• 2006

  Merge IDBP with the Investment Corporation of PakistanM&A

  Background

  IDBP had accumulated substantial losses and was described as insolvent by the middle of the 2000s.

  Action taken

  The Pakistani government merged IDBP with the profitable Investment Corporation of Pakistan, partly to improve IDBP’s financial performance.

  Aftermath

  The bank continued to face financial difficulties; its accumulated deficit was reported at approximately Rs. 28 billion by the end of 2009.

  Accumulated loss or deficit. Approximately Rs. 27 billion by the mid-2000s → Approximately Rs. 28 billion at the end of 2009 (Mid-2000s to end of 2009)

  Source

• 1961

  Broaden industrial credit beyond established enterprisesStrategy

  Background

  The predecessor institution was concentrated on larger loans and existing businesses, leaving new ventures, smaller industries, and projects based on prospective assets underserved.

  Action taken

  The government transformed PIFCO into IDBP, lowered the initial lending thresholds, authorized short-term industrial credit, and provided for lending against prospective assets and access to foreign-exchange resources.

  Aftermath

  The new institution was positioned as a development bank for medium-scale industry, small enterprises, and industrial expansion in less-developed regions.

  Source

1. 1Industrial Development Bank of Pakistanen.wikipedia.org