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Name: Eman Rana

Registration no: 1085-FMS-BSAF-F23

Course: Business finance

Course code: FIN-201

Submitted to: Dr. Tahira Awan

Batch: FMS-BSAF-17-A (F23)


Overview of Pakistan’s Economy:
Pakistan's economy, which ranks as the 24th biggest in the world based on GDP using
purchasing power parity (PPP), is categorized as developing. The nation has made progress
toward macroeconomic stability, but there are still many obstacles to overcome, such as rising
current account deficits, high inflation, and fiscal deficits. Agriculture is a major industry that
employs a significant percentage of the labor population, and the economy is defined by a broad
structure that includes manufacturing, services, and agriculture. Economic growth rates have
fluctuated recently, impacted by both internal policy and external economic circumstances.

Importance of the Financial system in Economic Development:


Pakistan's financial system is essential to the country's economic growth because it facilitates the
effective allocation of resources and the mobilization of savings. A strong financial system
makes investments easier, boosts productivity, and promotes economic expansion by giving
people and companies access to the cash they need. In addition, it is vital to risk management
and financial intermediation, both of which support a stable economic climate. Because of its
strong correlation with the nation's overall economic performance, the financial sector is a key
focus for policymakers seeking to achieve sustainable growth.

This diagram represents the economic growth rate of Pakistan from 2015-2025

Structure of the financial system:


1. State Bank of Pakistan (SBP):
The State Bank of Pakistan (SBP), which was founded in 1948, serves as both Pakistan's
central bank and the main body responsible for banking industry regulation. Its primary
responsibilities include establishing and carrying out monetary policy, overseeing the
banking industry, and maintaining financial stability. With its monetary policy
instruments, which include interest rate changes and open market operations, the SBP is
crucial in controlling inflation and promoting economic growth. The availability of
credit, investment choices, and consumer spending are all greatly impacted by how well
the SBP's policies work.
Total
Foreign Banks Public sector banks
13% 16%

Specialized banks
9%

Local private
banks
63%

Total

Islamic Banks
30%

Conventional
Banks
70%

Conventional Banks Islamic Banks

2. Commercial Banks:
The foundation of Pakistan's financial system is made up of commercial banks, which
offer a variety of services such deposit accounts, loans, and payment processing. They
fall into three categories: foreign banks, private banks, and public sector banks. Each of
these groups makes a distinct contribution to the world of finance. Government-owned
public sector banks are essential for financial inclusion and development funding,
whereas private banks are renowned for their effectiveness and level of customer care.
foreign banks increase competition in the industry by contributing money and foreign
knowledge. Habib Bank Limited, National Bank of Pakistan, and United Bank Limited
are major participants in this industry, holding the lion's share of the market in terms of
assets and clientele.

3. Non-Bank Financial Institution (NBFIs):


Non-Bank Financial Institutions (NBFIs) in Pakistan include investment banks, leasing
companies, modarabas, and mutual funds. These organizations offer alternatives to
commercial banks' services in the form of investment possibilities and financing choices.
By meeting particular demands like project finance and asset management, NBFIs
significantly improve financial intermediation. Their importance stems from their
capacity to mobilize funds and extend loans to industries that conventional banks may
overlook, so fostering economic expansion in general.

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