Hr Implications in Private Banks
Financial Sector Reforms and the Efficiency of Banking in Pakistan
Abdul Qayyum Registrar PIDE Email: abdulqayyum@pide.org.pk
Pakistan Institute of Development Economics (PIDE) Islamabad, Pakistan
1
Financial Sector Reforms and the Efficiency of Banking in Pakistan
1
INTRODUCTION The banking in Pakistan has been dominated by government owned
institutions. It has accommodated the financial needs of the government, public enterprises and private sectors (Khan, 1995; Khan and Khan, 2007). Public sector dominancy, among others, lead to inefficiency in the banking sector (Haque, 1997). The economic efficiency of the banks remained low that led to low savings and investment in the private sector which resulted in low growth (Khan and Khan, 2007). These problems include concentrated ownership of financial assets, high taxes, narrow range of products and have not diversified into consumer and mortgage financing (Haque, 1997 and Limmi, 2002). A strong regulatory and supervisory system is necessary to cop with the financial crises and promotes the efficient function of financial markets (Caprio and Klingebiel, 1997). Therefore the challenge is to formulate an appropriate regulatory framework that enables the banking system to be more resilient to insolvency. In addition timing, sequencing and speed of restructuring measures are very important for successful restructuring (Khatkhate, 1998 and Alawode and Ikhide, 1997). Moreover, the reforms of the financial system are important to remove market distortions (Eatwell, 1996; Mavrotas and Kelly, 2001; and Khan and Khan, 2007). Financial sector in Pakistan has been under reforms process since early 1990’s. The objectives of these reforms has been removing inefficiencies of financial intermediations and maintaining stability and enhancing growth (Faruqi, 2007). In order to improve the efficiency of financial system the Government of Pakistan initiated macroeconomic and financial sector restructing program.
Abdul Qayyum Registrar PIDE Email: abdulqayyum@pide.org.pk
Pakistan Institute of Development Economics (PIDE) Islamabad, Pakistan
1
Financial Sector Reforms and the Efficiency of Banking in Pakistan
1
INTRODUCTION The banking in Pakistan has been dominated by government owned
institutions. It has accommodated the financial needs of the government, public enterprises and private sectors (Khan, 1995; Khan and Khan, 2007). Public sector dominancy, among others, lead to inefficiency in the banking sector (Haque, 1997). The economic efficiency of the banks remained low that led to low savings and investment in the private sector which resulted in low growth (Khan and Khan, 2007). These problems include concentrated ownership of financial assets, high taxes, narrow range of products and have not diversified into consumer and mortgage financing (Haque, 1997 and Limmi, 2002). A strong regulatory and supervisory system is necessary to cop with the financial crises and promotes the efficient function of financial markets (Caprio and Klingebiel, 1997). Therefore the challenge is to formulate an appropriate regulatory framework that enables the banking system to be more resilient to insolvency. In addition timing, sequencing and speed of restructuring measures are very important for successful restructuring (Khatkhate, 1998 and Alawode and Ikhide, 1997). Moreover, the reforms of the financial system are important to remove market distortions (Eatwell, 1996; Mavrotas and Kelly, 2001; and Khan and Khan, 2007). Financial sector in Pakistan has been under reforms process since early 1990’s. The objectives of these reforms has been removing inefficiencies of financial intermediations and maintaining stability and enhancing growth (Faruqi, 2007). In order to improve the efficiency of financial system the Government of Pakistan initiated macroeconomic and financial sector restructing program.
References: 25 Worthington, A C (1999)