Find Banking and Financial Services expertise in Pakistan
Pakistan’s financial sector has gone through systemic changes since the 1990’s, when most banks were state-owned. A policy of privatisation began in 1991 and most of the major banks were privatised. The largest banks in Pakistan Muslim Commercial Bank, Habib Bank, United Bank and Allied Bank were all state owned until recently. Since 2002, Pakistan has also witnessed a surge in Islamic Banking. This is partly due to financial incentives such as tax exemption for a limited period for Islamic Banks. The sector is diverse, in 2012 the State Bank of Pakistan’s list of registered financial institutions consisted of: five public sector banks, four specialised banks, 17 private banks, five Islamic banks, seven foreign banks, nine microfinance institutions, and eight development finance institutions.
Regulation of Financial Services
The banking and finance sector is regulated by the State Bank of Pakistan (SBP) which is the central bank. The Prudential Regulations add to the bank’s responsibilities, the task of regulating against money laundering and criminal use of financial institutions. In 2002 the Banking Services Corporation (BSC) was set up as a subsidiary of the SBP to direct currency management, supervision of foreign exchange services, export and other finance services along with the management of government accounts. To regulate the increasing number of non-bank financial institutions (NBFI’s) which were allowed to grow rapidly to broaden financial markets, the NBFI’s Regulation and Supervision Department was set up. This department operates under the Prudential Regulations and Rules for Business set out by the State Bank issued specifically for NBFI’s. World Economic Forum’s Global Competitiveness Report (2012-2013) gives Pakistan a score of 4.9 out of 7 in soundness of banks, below the world mean of 5.1 but above such world leaders as the US and UK.
Development of Financial Services
The World Bank’s Ease of Doing Business Index ranks Pakistan 3rd out of eight countries in Southern Asia. It also ranks highly in terms of getting credit and protecting investors, coming 2nd in the group. The World Economic Forum’s Global Competitiveness Report (2012-2013) shows that Pakistan scores 4.0 out of 7 for availability of financial services, below the world mean of 4.5 but above Nepal. In terms of affordability of financial services the country scores below the world mean but equals with Nepal. In 2011 10% of adults aged 15 and over held an account with a formal financial institution. The WEF reports a score of 2.9, the same as the world mean in ease of access to loans. 2% of adults aged 15 and over took out a loan in the past year according to the World Bank (2011). The SPB supports financial and business development through its programs and initiatives; the Small Medium Enterprises Pakistan is supported by both the government and the SBP to foster development in the sector. In an attempt to increase financial sector expertise, the SPB runs the National Institute of Banking and Finance. Financing through local equity market is good, Pakistan ranks 54th out of 144 countries and scores higher than the world mean.