[dropcap]A[/dropcap]s compared to the fellow South Asian countries, Pakistan has a relatively friendly policy for the Foreign Direct Investment (FDI) making the country as one of the next best alternatives for the international investors who wish to invest in the industrial and manufacturing sector. While the investment outlook has improved, particularly with the improvement in law and order, however, corruption remains a major hurdle to foreign investment. Also, presently, FDI is coming from a handful of countries, which indicates that a lot needs to be done to make the country attractive for international investors. After being the frontline state in…
Author: Ahsan Nisar
[dropcap]F[/dropcap]oreign Direct Investment (FDI) has not been picking up in Pakistan for the last three years despite regular investments from China. The State Bank of Pakistan (SBP) has called an increase in FDI ‘imperative’ for the sustainability of the economy’s external sector. Foreign Direct Investment in Pakistan increased by US$2,761.10 million in 2016. Foreign Direct Investment in Pakistan averaged US$2,651.26 million from 2010 until 2016, reaching an all-time high of US$3,184.30 million in 2010 and a record low of US$2,099.10 million in 2012. Gross FDI inflows have been either declining (in FY14 and FY15) or only marginally increased (in FY16)…
[dropcap]D[/dropcap]espite encouraging advancements in the number of first time bank account holders, a startling gender gap persists in financial inclusion as a result of a variety of barriers to access across the developing world. Bringing women into the formal financial sector not only empowers them directly but also leads to welfare gains for the entire household and the community at large. At present, out of the 2 billion unbanked globally, 1.1 billion are women. The problem is especially acute in developing economies with women 20 percent less likely than men to have a formal bank account and 17 percent less…
[dropcap]P[/dropcap]akistan has the lowest rate of female entrepreneurship in the world, with only 1% of female entrepreneurs compared to 21% of male entrepreneurs. Access to finance is one of the factors that has prevented women from engaging in entrepreneurial activities, with only 5% of women having access to an account at a formal financial institution. Beyond this, there are many structural, institutional and socio-cultural barriers that restrict the entrepreneurial capabilities of Pakistani women. Below are a few norms that are particularly important to understand and address so that we can bring more women into the formal financial sector. Limited or…
FIRST WOMEN BANK LIMITED [dropcap]F[/dropcap]irst Women Bank Limited is a unique financial institution, a scheduled commercial bank, set up in 1989 by the then Prime Minister Benazir Bhutto, who wanted a bank that would meet the banking needs of women. It was incorporated in the public sector as a Public Limited Company on 21st November 1989 under the Companies Ordinance, 1984. The Bank commenced its business on 2nd December 1989 with a paid up capital of Rs100 million; 90% of which was contributed in varying proportions by five leading public sector banks of the country. They were: National Bank of…
[dropcap]O[/dropcap]n April 23, 2016, Pakistan signed Paris climate agreement, joining 174 other nations in a commitment to combat climate change. The Paris Agreement is an agreement among 175 countries within the UN Framework Convention on Climate Change (UNFCCC) dealing with CO2 emissions reduction. The agreement went into effect on November 4, 2016. The contribution that each individual country will make to combat climate change should be reported every five years and are to be registered by the UNFCCC Council. Research and development in e-car business date back to the 19th century. With the first electrically powered car being produced in…
[dropcap]P[/dropcap]akistan’s auto market is considered among the smallest, but fastest growing in South Asia. Over 280,000 cars were sold in the fiscal year 2016-17, rising from just above 200,000 units during fiscal year 2015-16. At present, the auto market is dominated by Honda, Toyota and Suzuki. However, on 19th March 2016, Pakistan passed the Auto Policy 2016-21, which offers tax incentives to new automakers to establish manufacturing plants in the country. In response, Renault-Nissan, Kia Motors, Audi, Volkswagen and Hyundai have expressed interest in entering the Pakistani market. Pakistan is a market of more than 200 million people. Given the…
AFFORDABILITY & ACCESS TO FINANCE [dropcap]P[/dropcap]akistan has a housing backlog of almost 10 million units (source: ABAD’s Real Estate Research, 2016 and Lamudi’s White Paper 2017). Only one percent of the housing units developed annually cater to 68 percent of Pakistan’s total population, comprising people who earn a maximum monthly income of Rs30,000. On the other hand, almost 56 percent of housing units target 12 percent of the population, comprising individuals with a monthly income of Rs100,000 and above. Currently, the housing shortage is estimated to be over nine million units with demand growing at a rate of 0.6 million…
[dropcap]T[/dropcap]he housing finance market is among the most important in the economy. It accounts for a sizeable portion of the production activity of a country, through its backward linkages to land markets, building materials, tools, durable goods and labor markets. During the last few years, favorable developments in the economy have facilitated the offering of housing finance by financial institutions. The increasing scope of finance for housing in Pakistan has led many local and foreign banks to be engaged in house financing activities. Low interest rates stimulate the real estate sector by encouraging home-buying activity and by making it less…
GROWTH TRENDS AND FUTURE PROSPECTS OF ISLAMIC HOME FINANCING [dropcap]A[/dropcap]fter the steps taken by State Bank of Pakistan (SBP) to promote housing finance in Pakistan and interest taken by banks to engage in home financing, the housing finance sector is growing. It is important to note that share of Islamic banking in Pakistan’s banking industry is more than 10 percent, however, in case of mortgage financing the share of Islamic product is over 20 percent. Today, Islamic Banking is available through 6 full-fledged Islamic banks and 16 conventional banks having Islamic banking branches. Islamic banks are currently able to offer…
[dropcap]P[/dropcap]akistan’s banking sector is passing through a phase that is both challenging and exciting. While challenges emanate from low interest rate scenario, maturity of high yielding government securities, rising cost of doing business, lack of broad based growth in private sector credit appetite, rising undocumented economy with high unbanked population and changing regulatory framework. Currently, there are robust growth opportunities in the retail segment across the country including rural areas and continuing opportunities for digital transformation led by technology and telephony services. The banking industry is undergoing significant transformation and the pace of commotion in the industry is accelerating. More…
[dropcap]S[/dropcap]ocial media is particularly a powerful channel of communication and therefore is of significant value to firms. Social media allows firms to contact their customers and vice versa, both pre- and post-sale. There are now more ways than ever to receive promotions, deals and points from financial services companies. Financial institutions are using the social web to facilitate payments, provide deals and gain customer’s trust. Social media has become a standard channel of communications for customers. Digital devices are growing on an exponential level. Globally, 46% of consumers have access to social media with digital devices to make informed purchases.…
[dropcap]B[/dropcap]asic mind set of any type of Investor is to manage the risk and maximize the returns. The common phenomenon in managing the risk is diversification or, in other words, not putting all the eggs in one basket. The diversification requires choosing which baskets to put your eggs in; and most importantly how much? This question and lack of expertise to invest in the financial markets gave birth to the mutual funds. The financial market experts found a gap and translated it in to the win-win situation for those who doesn’t exactly know when and where to invest and minimizing…
[dropcap]A[/dropcap] vibrant and robust capital market has a pivotal role in the economic growth and development of a country. There is strong evidence that countries with large stock market capitalization to GDP ratio also have large long term mutual funds (including pension funds) assets to GDP ratio. A prerequisite to the growth of mutual funds industry is the level of domestic savings and access to supply of tradeable stocks and bonds. Pakistan has a robust capital market infrastructure and adequate regulatory frame work. Pakistan Stock Exchange is also amongst the best performing stock exchanges in the world. Still the capital…
[dropcap]A[/dropcap]ccess to financing is now widely acknowledged as a path to meaningful economic inclusion and reduction in poverty. Policy efforts to increase access to finance in Pakistan have taken time to bear fruit, but now access is indeed expanding quickly in certain financial sectors (microfinance, remittances) albeit from a very low base. Nevertheless, policy measures cannot single-handedly increase financial access; financial institutions’ willingness to expand access in Pakistan has been stinted by slow technologic advances, weak legal foundations, and unsuitable financial processes and products. Poor socioeconomic conditions, gender bias, and low levels of basic education and financial literacy remain barriers,…
[dropcap]T[/dropcap]here are two schools of thoughts on the effect microfinance has had on poverty and financial inclusion. One says that there is no empirical evidence to support the claim that microfinance reduces poverty. They argue that the loan size is too small and, in fact, the high interest rate leads to a cycle of institutional indebtedness, let alone a reduction in poverty.The other school of thought is led by Dr. Muhammad Younus, who was awarded the Nobel Peace Prize in 2006, jointly with Grameen, the bank he founded in Bangladesh. Dr. Younus asserts microfinance is not just about lending. It’s…
IMPORTANCE OF INSURANCE [dropcap]B[/dropcap]roadly, there are two main channels through which the insurance sector can help the economic and social development of a country: first, by reducing uncertainty, and second, by generating long-term financial resources. Through the first channel, a well-functioning insurance sector facilitates the investment decision-making process and enables businesses to continue operating even if catastrophic events (such as earthquake, floods, and severe weather conditions, etc.) hit the economy. The latter, in turn, provides some protection to households by reducing probability of job and income losses. A developed and healthy insurance industry also protects households from any major financial…
[dropcap]I[/dropcap]nsurance companies are termed as the largest investors in capital markets, in addition to being characterized as the sole suppliers of insurance business to reinsurance companies. The insurance sector fosters financial stability by enabling economic agents to undertake various transactions with the facility of transfer and dispersion of risks. As a crucial component of the financial system, insurance plans are an important source of savings and long-term institutional investments essential for the development and growth of capital markets. The role of insurance as a financial intermediary is particularly important in countries like Pakistan with low levels of financial penetration. The…
[dropcap]W[/dropcap]hile the government makes tall claims of providing education to the citizens this is not reflected in the budget for the fiscal year 2017-18, which shows a decline in the amount earmarked for education. The government has allocated Rs2,961.926 million for the Ministry of Federal Education and Professional Training for fiscal year 2017-18 in the Public Sector Development Program (PSDP). A total amount of Rs576 million has been earmarked for new schemes of the Ministry of Federal Education, while Rs2,385.926 million would be spent on the ongoing schemes. The allocated amount for the new important schemes includes capacity building of…
[dropcap]E[/dropcap]ducation plays a pivotal role in the rise and fall of the nations especially in the 21st century importance of education influence much to meet the fast growing challenges. It is mainly due to the emergence of global competition in education and technology. This competitive environment is the core need for progress of any country. All countries including Pakistan have different school systems but when we divide them we find two major categories of school systems: private and public schools. In Pakistan, private schools are getting mass acceptance today to ensure sustained progress of the country. During 1990s and 2000s,…
[dropcap]T[/dropcap]he power sector in Pakistan is a mix of hydel and thermal units dominated by two vertically integrated public sector utilities that are Water and Power Development Authority (WAPDA) for all of Pakistan except Karachi, and the K-Electric (formerly KESC) for the city of Karachi and its surrounding areas and as well there are a number of independent power producers that contribute significantly in electricity generation in Pakistan. For years, the matter of balancing Pakistan’s supply against the demand for electricity has remained a largely unresolved matter. Pakistan faces a significant challenge in revamping its network responsible for the supply…
[dropcap]T[/dropcap]he present energy supply situation necessitates immediate working on alternative/renewable energy sources. The following analysis of energy situation in Pakistan further accentuates the need for the same. Some of the causes of power shortage are: – Increase in circular debt because of failure to curb power theft – Inability to recover billed amounts from consumers – Decline in hydro power because of water shortage – Decrepit secondary transmission lines To begin with, government must reconsider its approach to energy policy. Currently, the policy places too much emphasis on generation and not enough thought on why there is shortage in the…
[dropcap]T[/dropcap]he federal government has recently sold the Pakistan Security Printing Corporation (PSPC) to State Bank of Pakistan (SBP) for Rs100 billion as it seeks to cover shortfall in its revenues that surfaced after the United States withheld Coalition Support Fund (CSF) disbursements. The PSPC will now operate as a subsidiary of the State Bank of Pakistan (SBP). Primarily, the transaction will be a book management which was aimed at getting an extra Rs100 billion from the central bank to meet non-tax revenue shortfalls. For fiscal year 2016-17, the federal government had estimated receiving Rs280 billion from the central bank as…
[dropcap]T[/dropcap]he growth momentum of the banking industry in the second quarter of 2017 was supplemented by favorable macroeconomic conditions i.e. low interest rates, strengthening aggregate demand, uptick of industrial activity and positive outlook as CPEC related projects gain steam. However, low interest rates and build-up of low yielding stock of short-term government bonds has moderated the profitability of the banking sector. The profitability of the banking sector is expected to see some recovery given anticipated increase in both advances and investments. From solvency standpoint, banks are well positioned as the prevailing CAR is well above the minimum required level of…
[dropcap]I[/dropcap]mport payments is an important component of trade balance in the compilation of Pakistan’s Balance of Payments estimates. The payments of services contain all payments through banking channels performed by the nonresidents for residents, which includes transportation, travel, communication, construction, insurance, financial, computer and information, royalties/franchising and license fees, other business services, personal, cultural and recreation and government services. In 2001, remittance of royalty/franchise and technical fee or service charges was allowed by State Bank of Pakistan in the newly-opened sectors for Foreign Direct Investment (FDI) as per Government’s Investment Policy i.e. agriculture, social Infrastructure and service projects including international…
[dropcap]B[/dropcap]usinesses expand by franchising as way of accessing external capital to fund the growth of new stores or outlets that are operated by committed and profit-driven franchisees that are likely to be more diligent and focused than employed staff. Franchisees are attracted to franchising for the prospect to become their own boss without re-inventing the wheel. The adage “in business for yourself, but not by yourself” accurately describes this motivation. Entrepreneurs who have developed a successful business often wonder if they should franchise as a way to expand their operations. Like any business model, franchising has its benefits and drawbacks. There’s…
[dropcap]C[/dropcap]ontrary to popular belief, the biggest expenditure item in the 2017 budget is ‘interest’, not defense or education or any other services for the citizens. In fact, the amount of interest exceeds the total amount of defense, health and education combined. Interest payments account for almost 40% of the total budgetary allocation. The accumulation of deficits results in the need to seek funds from the IMF and other sources, which come at the cost of ‘interest payments’ to the country as there is no such thing as a free lunch. In addition, the IMF imposes many other conditions on us…
[dropcap]T[/dropcap]he significant challenges for Pakistan are scarcity of resources, poverty, and health issues etc. If it is to become a major player in addressing financial inclusion and poverty, following critical sectors in Pakistan’s economy must play a significant role in job creation and poverty reduction. Moreover in this regard, for sustainable community and for social development of the country, one must take the Corporate Social Responsibility (CSR) the central part for the economic and welfare integrity of the country’s institutions and organization and as well as for the companies strength. AGRICULTURE Pakistan has one of the world’s most impressive agricultural…
[dropcap]S[/dropcap]outh Asia is the world’s fastest growing region but economic growth alone could not be relied upon to end poverty. The region is also vulnerable to natural disasters. From Afghanistan to Bangladesh, much of South Asia is located in one of the highly seismically active regions in the world. More than 600 million people live along the fault lines across the Himalayan belt that runs through Afghanistan, Pakistan, India, Nepal and Bhutan. As part of the region, Pakistan’s growth must benefit the poorest and unlock opportunities for today’s much poor to get better jobs tomorrow and beyond. Disaster preparedness is…
[dropcap]T[/dropcap]he increasing presence of Islamic banking and finance in Pakistan’s financial sector and the country’s exemplary role in the global Islamic finance industry has called for an evaluation of the contribution of Islamic finance to the real economic activity. Islamic finance has started to make important contributions to the real economy by effectively carrying out the financial intermediation role of pooling and channeling funds to the investment activities, however, continuous efforts need to be undertaken to further expand the industry which includes refinement of the legal and regulatory framework to enable healthier growth of the industry, thus further strengthens Pakistan’s…
[dropcap]W[/dropcap]hilst the terms ‘loan’ or ‘lending’ are commonly used, even by Islamic banks, they are not strictly correct in an Islamic context because an Islamic bank is engaged in mutual trading both with and alongside its clients on both sides of the balance sheet. An Islamic bank has a direct interest in the outcome of all these trading transactions, sharing both profits and losses with its partners/clients. Unlike a conventional bank where depositors are creditors and borrowers are debtors and there is almost no mutuality at all, an Islamic bank has partners, investors, principals and agents at every level. Islamic…
[dropcap]T[/dropcap]he banks account for 80 percent of international remittances coming through formal channels into Pakistan, given their long history in the sector. The formation of exchange companies (ECs) in 2002 has significantly increased flows as hundreds of small moneychangers have been brought into the regulated sector and now account for more than 17 percent of international formal remittances. Both banks and ECs have multiple correspondents and relationships abroad. After 9/11, State Bank of Pakistan (SBP) took further action to formalize remittances, such as setting up centralized home remittance cells and forming exchange companies in 2002. The formation of exchange companies…
[dropcap]O[/dropcap]nce a saving grace, remittances have been under pressure since quite a while now. Remittance inflows in Pakistan are not growing at a comforting pace and a pretty much well established fact by now. The latest numbers for April 2017 only reconfirm the trend already visible in the year to date. As has been the case since the start of this year, the fall in remittance flows from Saudi Arabia has had the biggest dent on total remittance. In the ten months ending April 2017, total remittance dropped $448 million or 2.8 percent compared to an increase of 5.31 percent…
[dropcap]P[/dropcap]akistan has always stressed the need of a world class logistics and transport infrastructure for the speedy movement of goods and business in the region of Economic Cooperation Organization (ECO) and since the ECO is the formation for the boost of Central Asian countries trade and within its limited markets and export prospects China-Pakistan Economic Corridor (CPEC) is a major initiative that would help achieve the core objectives of ECO. The CPEC is anticipated as a game-changer not only in Pakistan-China economic context but it would also complement the economies of the entire neighborhood, especially the ECO region. In transport…
[dropcap]I[/dropcap]n recent years, financial inclusion is one area where stakeholders of the financial ecosystem have been focusing lately as part of a broader strategy to reduce poverty, encourage economic development, and promote stability and security. The term ‘financial inclusion’ refers to the provision of accessible, usable, and affordable financial services, either through the formal or informal financial sector, to underserved populations. Financial inclusion also applies to ‘underbanked’ communities, where people lack reliable access to or are unable to afford the associated costs of financial services. ‘Digital financial inclusion’ can be defined as digital access to and use of formal financial…
[dropcap]A[/dropcap]s the Information and Communication Technology (ICT) revolution unfolds, it will indeed bring benefits, but it will also bring risks and challenges. There are plenty of reasons to be cautious, responsible, and measured in the use of digital financial services but that should not stop the potential for great progress. Privacy concerns, for example, are real, and there could be a healthy societal debate on what data is and is not appropriate to use and for what purposes. But there is no question that banks can use the data that is increasingly available to rethink the way they deliver financial…
[dropcap]H[/dropcap]igh aggregate demand and falling energy prices for the past couple of years should have been a stimulus for domestic investment and steadily rising production. That is not how it has worked out, with rising demand leaking into imports and, probably, into the shadow economy. Over the past five years, growth has been fueled by rising consumption, now 89 percent of GDP, and growing at around 5 percent annually against GDP growth of under 4 percent per year. The modest GDP growth we have been able to muster is led by the services sector, while manufacturing and agriculture have performed…
[dropcap]T[/dropcap]he current account deficit during the first eight months (July-Feb) of this fiscal 2016-17 has reached $5.47 billion compared to $2.48 billion in the same period of the previous fiscal year. Analysts say lackluster exports, rising imports and weakening remittances are the major reasons behind this deficit. Pakistan’s trade deficit widens to 22 percent, stands at $9.3 billion. The rise in overall import payments was mainly driven by higher purchases of fuel and capital equipment. This is understandable given that Pakistan is transitioning from a low-growth to higher growth phase, and is addressing supply-side bottlenecks in energy and infrastructure. Until…
COUNTRY’S OIL REFINING CAPACITY [dropcap]P[/dropcap]akistan’s oil production reached a two-year high at around 97,000 barrels per day in December 2016 after oil and gas exploration and production companies geared up their drive to find new deposits of hydrocarbons in the country. The surge in production became possible with find of new oil reserves from Nashpa and Mardan Khel fields. Both fields added around 11 percent to December 2016’s oil production, a cumulative flow of around 10,000 barrels per day (bpd) of oil. The production meets around 20 percent of domestic demand. The remainder is met through imported crude oil and…
SMALL & MEDIUM ENTERPRISES (SMES) [dropcap]P[/dropcap]akistan Stock Exchange (PSX) has proposed 20 percent corporate income tax rate for small and medium size listed companies to promote entrepreneurship. The PSX proposed amendment to Income Tax Ordinance, 2001 for reduction in the rate stating: “Provided that where a taxpayer is small or medium sized company as defined under the Companies Ordinance, 1984 and is also listed on the registered Stock Exchange in Pakistan, the rate of tax imposed on the taxable income of such company, other than banking company shall be 20 percent for the tax year 2018 and onwards.” Pakistan had…
[dropcap]P[/dropcap]erhaps one of the stingiest problem for the banking sector is that of non-performing loans (NPL). The phenomenon is more widespread in the Asian financial sector than anywhere else, as incidents of advancing loans on criteria other than pure meritocracy remains rampant in the Asian financial sector. At the close of 2016, total non-performing loans in the financial sector stood at Rs619 billion. The largest chunk of the pie rested with the local private banks which held 61 percent share of the NPL portfolio. Next in list were the public sector and specialized banks, which held 31 percent and 6…
[dropcap]T[/dropcap]he current account deficit is set to widen at a faster pace as international oil prices have started recovering after remaining weak for the past eight consecutive quarters. Pakistan is a net oil importer and meets about 75% of needs through imports. Oil imports carry the heaviest weight in total imports of the country. Oil payments, which had been declining for the eight consecutive quarters reversed trend in the second quarter of FY17 and tacked onto an already elevated non-oil bill. The current account deficit in the first eight months (Jul-Feb) 2016-17 has already touched $5.47 billion compared to $2.48…
[dropcap]B[/dropcap]anking sector of Pakistan has revealed massive growth and potential over the years. There is a considerable expansion in the profitability of the banking sector demonstrated by performance and stability indicators. Mainly in operations of economic development, banks as financial intermediaries play an important role and their efficiency can also influence the economic growth. There are important implications of changes in the interest rate on the economy. In the banking system, impact of interest rate changes has been a significant issue. As compared to other institutions, banks are more sensitive to the changes in the interest rates. In FY17, interest…
[dropcap]W[/dropcap]hile remittances to South Asian countries from the Gulf Cooperation Council (GCC) countries declined by 2.3 percent in 2016, Pakistan witnessed 5.1 percent growth during the same period according to World Bank. However, remittances from the GCC countries continue to decline due to lower oil prices and labor market ‘nationalization’ policies in Saudi Arabia. Policies favoring employment of nationals over migrant workers have discouraged demand for migrant workers in the GCC countries. Low oil prices continued to be a factor in reduced remittance flows from the GCC countries. In addition, structural factors have also played a role in dampening remittances…
[dropcap]P[/dropcap]akistan has one of the world’s most impressive agricultural systems but its potential still not yet fully utilized. Agriculture could become the main driver of economic growth and poverty alleviation but for that to happen policymakers at the federal level as well as in the provinces will have to appreciate the sector’s potential as well devise public policies to realize it. From about the late nineteenth century to the present, the state has had a heavy hand in guiding agriculture to produce for the market. The main point I will make in the article today is that the government should…
[dropcap]P[/dropcap]akistan’s automotive industry is the one of the fastest growing industries of the country while accounting for 4 percent of Pakistan’s GDP and employing a workforce of over 1,800,000 people. Currently there are 3,200 automotive manufacturing plants in the country, with an investment of ₨92 billion (US$880 million) producing 1.8 million motorcycles and 200,000 vehicles annually. Its contribution to the national exchequer is nearly ₨50 billion (US$480 million). The sector, as a whole, provides employment to 3.5 million people and plays a pivotal role in promoting the growth of the vendor industry. Pakistan’s auto market is considered among the smallest,…
RENAULT TO PRODUCE CARS [dropcap]R[/dropcap]enault, a French car manufacturing company, is expected to start assembling cars in Pakistan by 2018. This will be the first time that a European car manufacturer will set up a plant in Pakistan. Established in 1899, the automobile company produces a range of cars and vans, and has also manufactured trucks, tractors and tanks, among others vehicles in the past. Renault would initially make an investment of $100 million to produce 6,000 vehicles per shift at the plant set up by Ghandhara Nissan Motors in Karachi. The company already has an alliance with Nissan since…
[dropcap]T[/dropcap]he transport situation, especially in metropolitan cities always a grave issue. Buses are in deplorable conditions and have closed operation on routes, which they consider non profitable. According to a report, buses are to ply on more than 300 different routes in Karachi but they are operating on only 115 routes, causing huge difficulty to commuters. Taxis and rickshaws, plying on roads of the city, are charging arbitrary fares and the public, with no viable option in sight, has to avail other transport services. Considering the existing pathetic situation of our public transport, two multinational transportation network companies – Careem…
[dropcap]T[/dropcap]he remittance market for sending foreign exchange into Pakistan using remittance transfers both by overseas workers and the rest of the Pakistani diaspora, as well as by other agents for both legal and illegal transfers, can be broken down into the following: 1. Remitters from overseas who demand Pakistani rupees in exchange for a foreign currency to be paid in Pakistan through official or unofficial channels. 2. The remittance market within Pakistan that transfers both officially recorded remittances through banking and other recognized channels under an overall regulatory framework supervised by the State Bank of Pakistan (SBP), as well as…
[dropcap]W[/dropcap]hile a large percentage of remittances are sent through informal channels, formalization of remittance transfers makes the process more secure and easily monitored and allows these funds to be directed toward savings. Reducing the cost of transfers encourages the use of more formalized systems while formalizing remittance transfers can help allow unbanked remittance clients to access other financial products. Studies show that security, ease, timeliness, geographic accessibility, payout options, and price of transaction are the main factors when remittance senders choose a transfer service. Developing a secure, affordable, accessible, timely, flexible, and innovative transfer service is thus important in establishing…
MOBILE WALLETS [dropcap]W[/dropcap]ithin branchless banking framework, Over the Counter (OTC) Model is agent facilitated which no matter how convenient and reliable, is slowing down the pace of promotion of financial inclusion by limiting customers’ access to facilitated transactions only. This barrier could be addressed via a shift from OTC to mobile wallets. Presently, OTC dominates over mobile wallets in terms of volume and value of customers. However, with the SBP approval of mobile wallet account opening through biometric verification, it now takes less than five minutes to open a mobile wallet. BITCOIN Another area that may offer promise for financial…
COMMERCIAL BANKING SECTOR INDICATORS Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits Other November 2015,PKRbn 12,757.3 5,018.6 6,439.5 1,299.2 12,757.3 1,557.1 8,690.9 2,509.3 November 2016,PKRbn 13,941.2 5,657.7 7,026.8 1,256.8 13,941.2 1,574.4 9,963.3 2,403.5 % change y-o-y 9.3% 12.7% 9.1% -3.3% 9.3% 1.1% 14.6% -4.2% November 2015,USDbn 121.0 47.6 61.1 12.3 121.0 14.8 82.4 23.8 November 2016,USDbn 132.7 53.9 66.9 12.0 132.7 15.0 94.9 22.9 % change y-o-y 9.7% 13.2% 9.6% -2.9% 9.7% 1.5% 15.1% -3.8% Source: BMI Research [divider style=”normal” top=”20″ bottom=”20″] COMMERCIAL BANKING SECTOR KEY RATIOS, OCTOBER 2016 Loan/deposit ratio Loan/asset ratio Loan/GDP…
[dropcap]T[/dropcap]he recently concluded 13th ECO Summit 2017 is extremely relevant in the backdrop of ever growing importance of China-Pakistan Economic Corridor for its member countries. This passageway is a framework of regional connectivity as CPEC will not only benefit China and Pakistan but will have positive impact on Iran, Afghanistan, India, Central Asian Republic and the rest of the region. The enhancement of geographical linkages having improved road, rail and air transportation system with frequent and free exchanges of growth and people to people contact, enhancing understanding through academic, cultural and regional knowledge and culture, activity of higher volume of…
[dropcap]R[/dropcap]eal estate market is crucial for promoting commerce and industry, growth and employment, and poverty reduction. The liberalization of the Pakistani economy has increased business opportunities and migration of the labor force to urban localities has led to an increase in the demand for both commercial and housing space. However, the role of formal real estate investment markets in the process of economic development remains poorly understood. The lack of understanding is, in part, a direct result of the absence of reliable information on real estate values, yields and total returns. The real estate market is the market that encompasses…
[dropcap]M[/dropcap]utual funds play an essential role for channelizing and optimal allocation of idle resources/savings available in the economy of the individual as well as institutional investors. The mutual funds are asset management companies, which invest in stocks, bonds and other types of money market or combination of these securities. The primary goal of mutual fund is pool small savings, use the idle resources in corporations and invest in a well-diversified portfolio of securities, which would allow the investor to significantly reduce, or even eliminate the asset specific (non-market) risk of securities. The presence of these mutual funds becomes even more…
[dropcap]T[/dropcap]he power sector in Pakistan is a mix of hydel and thermal units dominated by two vertically integrated public sector utilities that are Water and Power Development Authority (WAPDA) for all of Pakistan except Karachi, and the K-Electric (formerly KESC) for the city of Karachi and its surrounding areas while there are a number of independent power producers that contribute significantly in electricity generation in Pakistan. For years, the matter of balancing Pakistan’s supply against the demand for electricity has remained a largely unresolved matter. Pakistan faces a significant challenge in revamping its network responsible for the supply of electricity.…
[dropcap]O[/dropcap]ver the past 10 years, a little over a dozen Pakistani brands were launched in the global marketplace. Inspired by their success, many more are now aspiring to explore new possibilities overseas. If the trend picks up, it can help push up exports of the value-added, high priced quality products. While securing a place in a crowded global marketplace is difficult, the lack of respect for intellectual property rights (IPR) in the country makes the task more daunting. Pakistan’s perception as a violator of IPR does not help local firms amid not so conducive international environment. Some food and beverage…
[dropcap]P[/dropcap]akistan’s economy has rebounded in recent years, with improving security across the country fueling economic growth. Pakistan was the world’s fifth highest-returning stock market in 2016, but the growth was driven by local investors, with the bourse eager to attract more foreign inflows. The market capitalization of the PSX is around $90 billion, although only about a quarter of that is freely tradable. Pakistan’s bourse was boosted last year when the country’s stock market was reclassified to be included in the MSCI’s emerging market index category. In December 2016, the average daily value of trades stood at about $200 million,…
Vibrant and stable financial sector and capital market play a significant role in the economic growth of a country. This, however, is only possible in the wake of a wide range of saving and investment products being available to meet the risk appetite of investors and the funding needs of borrowers. Unfortunately, this is not the case in Pakistan where the banking and non-banking financial sectors have not performed up-to the mark on this account. Even the banking sector despite having dominant position and privatization has not come up with major innovative products to adequately meet requirements of both depositors…
[dropcap]O[/dropcap]ccupational violence is a worldwide, multifaceted problem affecting all industries, including healthcare. Frequency of hospital violence exists beyond news headlines and television shows impacting significant number of care providers and patients. Hospitals at one time were much like mosques and schools and were considered somewhat sacred. Unfortunately, that’s not the case anymore. Previously, violence had only been addressed as a criminal, psychological, anthropological or sociological problem. The most frequent form of occupational violence was verbal abuse, followed by threatening behavior, physical violence, and obscene behavior. Violence is increasing in hospitals because: 1. Doctors are no longer thought of as ‘miracle…
Life insurance against non-life segment taking much interest [dropcap]T[/dropcap]he insurance market in Pakistan is poised for rapid growth as the economy expands and diversifies, leading to greater demand for insurance products and higher rates of affordability among the enormous potential consumer market. However, structural challenges will continue to hamper the market from reaching its full potential. Poverty rates are high, as are informal employment rates, and this lessens demand for retirement and other life products. The non-life sector remains heavily reliant upon basic lines and in a fragmented and disjointed marketplace there is downwards pressure on pricing and limited profit…
[dropcap]T[/dropcap]he rising oil prices are the major concern for all the developing economies and Pakistan is suffering from it too. Petroleum products account for a substantial portion of Pakistan’s import bill. In 2011-12, Pakistan imported $18.9 billion worth of crude oil but courtesy of the steep fall in the commodity’ international price, oil imports came down to $7.9 billion in 2015-16. The savings on oil import enabled the country to increase the purchase of machinery and other capital equipment essential for development without having the current account deficit shoot up. Not only that, low oil prices were instrumental in keeping…
[dropcap]C[/dropcap]onsumer financing has seen a surge in the last two fiscal years primarily due to a big jump in auto loans and to some extent in mortgage finance. Consumer finance serves as the source of financial stability and uplifts the economic and social status of the household. At the macroeconomic level, consumer financing has significantly contributed to economic turnaround by stimulating consumption and investments. There has been a phenomenal increase in private consumptions due to easy availability of credit from banks. Low interest rate spread is an important indicator of the efficiency and competition in the financial systems and helps…