Role of Financial Institutions in Economy’s Development of Pakistan The importance of Financial Institutions (FIs) cannot be overemphasized. Financial Institutions perform the important function between providers of investable funds (depositors, securities holders etc.) and the users of such funds (namely businesses). Any economy can’t progress without its financial sector facilitates its business activities consistently, and in the case of a developing country like Pakistan, these FIs act as a necessary source for economic growth as well. The State Bank of Pakistan has played two very important roles as the financial sector. Firstly it ensures soundness of banks and DFIs with a view to maintain financial stability; secondly it pursues a developmental objective under which it facilitates financial markets developments and enhancement of access to finance. The banking system, which contributes 88 percent share of the total financial sector and the share of non-bank financial institutions, is approximately 12 percent. The Banking sector of an economy is generally the most significant player and performs three primary functions which include the facilitation of the payment system, mobilization of savings, and allocation of loanable funds. Historical perspective:
The current structure of the financial sector in Pakistan is the result of several policy shifts and developments. The eras of financial sector developments in Pakistan can broadly be segregated into 1947–70, 1971–90 and 1991 to date period. Period of 1947 to 1970
In 1947 the banks services were adversely affected and in June 30, 1948, the number of branches of scheduled banks came down to only 81 in the area of Pakistan. However, commercial banking made tremendous progress and achieved phenomenal growth and there were 14 scheduled Pakistani commercial banks with 3,323 branches all over Pakistan and 74 branches in foreign countries. Development Financial Institutions (DFIs) played an important role in the...
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