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Financial System play a meaningful role in economic development of the country: Yaseen Anwar

Karachi, March 04, 2013 (PPI-OT): The Governor, State Bank of Pakistan (SBP), Mr. Yaseen Anwar has observed that the financial system in Pakistan is yet to grow to its full potential and play a more meaningful role in the economic
development of the country.

Delivering his speech on ‘Developing Non-Bank Financial Models while addressing the risks of Shadow
Banking’ at the SECP Conference on Non-Bank Financial Institutions at a local hotel in Karachi today, he
said that we definitely need to add to its diversification and depth.

NBFIs can play a meaningful role in this pursuit, he said, adding that in the light of the global financial crises, we are better informed about the various risks that the NBFIs/Shadow Banking carries with it. ‘As regulators we need to remain vigilant to ensure that those risks are mitigated without inhibiting sustainable non-banking financing models,’ he said.

Mr. Anwar said that while the overall assets of the financial sector in Pakistan have increased from
Rs. 5.202 trillion in 2005 to Rs. 11.107 trillion in 2011, the share of the financial sector in terms of GDP is
very low at 57.4 percent.

He said that in 2011, Banks held 74 percent of the financial assets while the share of NBFIs was only 4.7 percent of the total financial sector assets which was around 7.6 percent in 2005.

‘The low financial sector to GDP ratio and NBFIs declining share in financial sector assets clearly underscores the need for financial sector development and diversification of financial sector assets to attract investors with different return expectations and risk appetite and channelize financial resources for the economic development of the country,’ he observed.

The “shadow banking system” is defined as “the system of credit intermediation that involves entities
and activities outside the regular banking system”, he said, adding that the emergence of the term
reflected recognition of the increased importance of entities and activities structured outside the regular banking system that perform bank-like functions.

SBP Governor briefly outlined the following four major constraints that the NBFI sector in Pakistan is
beset with: First, although there has been an increasing effort by NBFIs to broaden the range of their
business activities and product base, thereby diversifying their revenue streams, the sector is
yet to make a breakthrough in this regard.

Second, the sector is fragmented and each NBFI is trying to create its niche market in pursuit of
establishing a sustainable revenue stream.

In this regard, most companies are concentrating on financial advisory and other fee-based income segments. Unfortunately, the sector is yet to capitalize on the huge opportunities offered by previously relatively untapped areas like SMEs, Consumer, and Agriculture segments to enhance avenues for fund deployment.

Third, the sector needs to develop and diversify sources of funding for sustainable growth. This
would require a shift from the traditional sources such as commercial banks credit lines etc. for

For more information, contact:
Syed Wasimuddin
Chief Spokesman
State Bank of Pakistan (SBP)
Tel: +9221 3921 2562
Fax: +9221 3921 2563
Email: syed.wasimuddin@sbp.org.pk

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