Financial Markets in Pakistan

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Financial Markets in Pakistan

A financial market is a place for buying and selling of financial securities such as stocks and bonds. It facilitates: * The raising of capital (in the capital markets)
* The transfer of risk (in the derivatives markets
* In matching those who want capital to those who have it. Financial Market in Pakistan consists of (i) Money Market which provides short term funds and (ii) Capital Market which makes long terms funds available to businesses and industries. The Financial market can be reclassified into (i) Primary Market in which new shares or bonds are issued and (ii) Secondary Market in which securities previously issued are traded such as Shares, Bonds, Commercial Papers, Options and Mutual Fund. Of this, the banking sectors and non-banking sectors are regulated by the central bank, State Bank of Pakistan. While rest of the market (lease, stock exchanges, modarba, mutual funds and insurance) is regulaled by Secruities and Exchange Commission of Pakistan. FINANCIAL MARKETS AND THEIR ROLES:

COMMERCIAL BANKS
A type of bank providing checking and saving accounts, credit cards and business loans. Such a bank induces general public to deposit their savings in the banks and offers a wide range of services such as: * Deposit Mobilization

* Money transfer
* Financing Working Capital
* Financing other trade related mode (import and export)
* Investing in government securities
* Call money operations
These banks are of three categories (i) Public Sector Banks, (ii) Private Bank and (iii) Foreign Banks.

LEASE -FINANCE EQUIPMENT
INVESTMENT BANKS
Investment banks perform a variety of functions. Primarily, they assist corporations to raise equity-capital by underwriting the public issues. They also assist companies desiring of mergers and acquisition and derivatives. In addition, they provide services like trading of derivative, foreign exchange, fixed income instruments and shares listed on the stock exchanges. Such banks cannot take deposits. They manage their affairs by charging fees such as (i) retainer fee, (ii) advisory fees based on the transactions, (iii) commission on underwriting and (iv) other financial services.

PICIC was once a premier development in Pakitan but has merged with a commerical bank. BOND MARKET OUTLOOK
DEVELOPMENT BANKS
These banks provide guidance in selection of industrial units and extend direct financial assistance to partly cover their financial requirements. Also, they engage themselves in promotional activities to attract investors towards neglected sectors through publishing brochures and research papers. Besides, they help in assessing feasibility of potential projects. Such banks are responsible for speeding up the pace of economic growth in the country in conformity with the national objectives, plans and priorities. Their core functions are:

* Direct financial assistance
* Catalytic function
* Mobilization of domestic savings
* Ensuring balance regional and industrial growth
* Expanding entrepreneurial base by encourage new comers
At one time, there were 14 Development Banks in Pakistan. However, most of them have been closed one after another as their bad debts mounted up. It is natural as they take substantial risks in promoting new types of industrial projects in underdeveloped areas sponsored preferably by new-comers. Nevertheless, their contribution brings fruits to the economy in the shape of successful industrial units and transfer of technology. At present, 8 development banks are operating which mostly are joint-venture with other Islamic Countries.

MICROFINANCE BANK
A microfinance bank would cater to the credit needs of poor households and their small enterprises. Thus microfinance bank provide credit to those poor who are not considered creditworthy by the commercial banks and other financial institutions. On the other hand, the microfinance bands recognize every single human being...
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