Developing Nations Need To Enhance Credit Absorption Capacity – OpEd |
Bank credit is an elixir of growth. Effective end use of credit generates income and employment on a sustainable basis. But, the credit overflow to economic sectors also creates loan defaults and indebtedness. The inability to create a credit absorption capacity is one of the main reasons why the developing nations continue to carry a huge Non Performing Asset burden.
There has been an alarming increase in the NPAs in banks in the developing countries; 61 developing nations spend 10% of their governments’ revenue on interest payment. High bank NPA adversely affects the economic and the social life in the developing nations; nearly 46 developing nations spend more on interest payment than on education and health care. The developing nations can overcome the bad loan problem by creating credit absorption capacity in their own countries.
The world population is estimated to reach 9.1 billion by 2050; accordingly, the global food production needs to increase by 60% to 100% by 2050. This will create a huge demand for bank credit. If the developing........