Financial and Capital Markets

Introduction

• Evolved from a state of nothingness in 1947, to playing an important role in economic development and being integrated with the rest of the world today.

• Expanded exponentially

• Growing securities market for investment funds

Introduction

• Why is the financial market important?– To channel domestic savings into high return

high return investment– A system of market determined credit

allocation by commercial banks– Together, these will generate economic growth

The Development of the Banking Sector: The First Phase (1947 – 74)

• It took many years to acquire the country’s economic and financial independence (has it been achieved by today or not??)

• The banking and financial sector, like industry, were little developed in ’47

• Areas which became Pakistan were severely under-represented in terms of banking and financial services

• No Central bank; The Reserve Bank of India, which was legally a common property of both India and Pakistan, continued to serve as a currency and banking authority for Pakistan till ‘48

The First Phase (1947 – 74)

• Prior to independence, only one of the 99 listed scheduled banks had its office in Pakistan

• United India had 3,469 branches of banks, but only 631 were located in areas that were to become Pakistan (East and West)