Cap Markets in Pak

1 CAPITAL MARKETS IN PAKISTAN
FINANCE
 Introduction:
 Business concern needs finance to meet their requirements in the economic
world. Any kind of business activity depends on the finance. Hence, it is called as
lifeblood of business organization. Whether the business concerns are big or
small, they need finance to fulfil their business activities.
 Meaning:
 Finance may be defined as the art and science of managing money. It includes
financial service and financial instruments. Finance deals with the management of
funds and their effective utilization in business concerns.
 It refers to the management of money including activities related to saving,
borrowing, investing and budgeting to achieve financial goals.
 Finance refers to the acquisition of funds, utilization of funds and the retention of
funds.
FINANCIAL MANAGER :
 Someone who overlook and makes decisions about an organization’s money
including managing budgets, investments and financial planning.
ROLE OF FINANCIAL MANAGER :
1. Provision of capital
2. Financial planning and analysis
3. Investment decision making
4. Risk management
5. Cash flow management
6. Financial reporting and analysis
7. Capital Structure / budgeting
8. Evaluation and uncertainty
9. Tax administration
 Fields of Finance :
1. Personal Finance
COMPOSED BY MR
KHAN
2. Corporate Finance
3. Public Finance
1. Personal Finance :
 It involves managing an individual budgeting, saving, investing, planning for
future.
2. Corporate Finances :
 It deals with managing the company finance including analyzing investment,
making financial decisions and deciding capital structure.
3. Public Finance :
 It focuses on gov.t finance including activities like budgeting, taxation and gov.t
expenditures.
 Financial Decisions :
 Financial decisions involve making choices about how to manage and use money.
These choices include spending, saving, investing, borrowing and planning for
future. Making smart financial decisions help to achieve financial goals and secure
a stable financial future.
Types of Decisions :
1. Investment Decision:
 Decisions where to invest money to generate returns. It can be in stock, bonds,
real estate or other assets. The goal is to make choices that being the best
possible return for given level of risk.
2. Financing Decisions:
 It involves decisions about how to raise funds for a business or a project. It may
be choosing among different sources of funds like, issuing stocks, taking loans
etc.
3. Dividend Decisions:
 Dividend decisions deals with how much portion of a company's profit should
distribute among its shareholders as dividend.
FINANCIAL SYSTEM
COMPOSED BY MR
KHAN
 Financial system refers to the complex network of institutions, Markets and

transactions that facilitate the flow of money and financial assets within an
economy.
 It includes banks, stock exchange, insurance companies, businesses and govt to
manage their financial resources.
E.g.
 Imagine you want to buy a car. You don’t have enough cash to pay for it. So you go
to bank and take a loan. They provide you money for your car and later on you will
have to pay the money back with interest.
Financial system includes,
BANK
 They provide your loan, manage deposits and facilitate transactions.

 Financial Markets
 A market where financial assets are bought and sold is called financial markets.
 Insurance Companies
 They provide financial protection against various risks, etc.
 All these systems are working together which facilitate the transfer of funds from
saver to investor or from surplus economic unit to deficit economic unit.
 Surplus economic unit
 An entity that earn more income than its spend resulting in positive balance.
 Deficit economic unit
 A deficit economic unit is an entity that earn less than it spends resulting negative
financial balance.
ECONOMIC SYSTEMS
COMPOSED BY MR
KHAN
 An economic system is the way in which a country or society organizes how goods
and services are produced, distributed, and consumed.For instance, in some
countries, businesses decide what to sell, and in others, the government plays a
bigger role in deciding.
 An economic system shows how money moves around in a country's economy. It's
like a map that illustrates how people earn, spend, and save money, and how
businesses and government are involved in this process. Different economic
systems have different ways of managing this flow of money and resources.
1. CAPITALISM:
 Capitalism is an economic system where businesses and industries are mostly
owned by private individuals or companies, and prices, production, and
distribution of goods are determined by competition in the marketplace.
Four countries where capitalism is used:
1. United States
2. United Kingdom
3. Canada
4. Australia
Characteristics of capitalism:
 Private ownership of businesses and resources
 Competition among businesses
 Prices determined by supply and demand
 Profit motive drives production and innovation
 Limited government intervention in the economy
 Freedom to buy, sell, and invest
 Mobility to choose jobs and careers
 Consumer choice and freedom in the marketplace
Advantages of Capitalism:
 You can choose what to buy.
 People come up with new ideas and start businesses.
 Things get made efficiently and many choices are available.
Disadvantages of Capitalism:
COMPOSED BY MR
KHAN
 Rich and poor gap can become big.

 Some workers might be treated unfairly.
 Profit is more important than helping everyone.
 Nature might be harmed for money.
2. SOCIALISM:
 Socialism is an economic system where the government or community owns and
controls major industries, and the wealth generated is shared among the people
to reduce inequality and ensure everyone has access to basic needs.
Characteristics of Socialism:
 Government or community runs important businesses.
 Money is shared more evenly.
 Everyone gets basic services like healthcare and school.
 Planning by the government for what's made.
 Helping the group is more important than just making money.
 There are fewer rich and poor gaps.
Advantages of Socialism:
 Everyone gets access to important services like healthcare and school.
 Less difference between rich and poor.
 People work together for common good.
 Basic needs are a priority over making money.
Disadvantages of Socialism:
 Less motivation for people to work hard or come up with new ideas.
 Government might have too much control and limit freedoms.
 Hard to figure out what to produce and how much.
 Can lead to inefficiency and shortages.
3. MIXED ECONOMIC SYSTEM:

 A mixed economic system is when a country combines elements of both
capitalism and socialism in its economy. This means there are private businesses
and government involvement, trying to balance individual choices and social
needs.
COMPOSED BY MR
KHAN
Four Countries with Mixed Economic Systems:

1. Pakistan
2. Canada
3. Germany
4. United Kingdom
Advantages:
 Flexibility in accommodating various economic activities.
 Encourages innovation and entrepreneurship.
 Government intervention ensures resource allocation to key areas.
 Balances individual freedom with social welfare.
 Government regulations protect consumers.
 Public programs reduce poverty and inequality.
Disadvantages:
 Complexity due to balancing private and public interests.
 Inefficiencies from bureaucracy and political factors.
 Uncertainty due to shifting government policies.
 Risk of corruption and favoritism.
 Potential stifling of innovation in the private sector.
 Resource misallocation from inaccurate information or politics.
4. ISLAMIC ECONOMIC SYSTEM:

 The Islamic economic system is a framework for economic activities guided by
Islamic principles and teachings from the Quran and Hadith (sayings of Prophet
Muhammad). It emphasizes social justice, fairness, and ethical considerations in
economic transactions. Some key features include the prohibition of interest
(usury), the promotion of risk-sharing, and the encouragement of charitable giving
(zakat).
 A financial framework based on Islamic principles from the Quran and Hadith,
emphasizing fairness, social justice, and ethical conduct in economic activities.
Advantages:
COMPOSED BY MR
KHAN
 Equitable Distribution: Focuses on distributing wealth fairly among all members

of society.
 Reduced Inequality: Aims to narrow the wealth gap and promote economic
justice.
 Ethical Transactions: Encourages honest, transparent, and ethical business
dealings.
 Stability: Prohibition of interest can lead to more stable financial systems.
 Risk-Sharing: Promotes shared risk in business ventures, fostering cooperation.
 Charitable Giving: Encourages regular charitable contributions (zakat) for the
welfare of society.
 Social Welfare: Emphasizes the well-being of the entire community over
individual profit.
 Sustainable Development: Supports economic growth while considering long-
term sustainability.
 Community Cohesion: Fosters cooperation and harmony within communities.
 Crisis Resilience: May reduce vulnerability to economic crises caused by debt-
related issues.
Several countries have attempted to implement aspects of the Islamic economic system
to varying degrees. However, it's important to note that the extent to which these
principles are implemented can vary greatly from country to country. Some examples
include:
1. Saudi Arabia: Implements Islamic finance principles and has a Shariah-compliant
financial sector.
2. Iran: Applies Islamic principles in its economic policies, including interest-free banking
and support for cooperatives.
3. Pakistan: Has introduced Islamic banking and finance as an alternative to
conventional banking systems.
4. Malaysia: Promotes Islamic finance and has established a robust Islamic banking and
finance industry.
5. United Arab Emirates (UAE): Dubai and other emirates have developed Islamic
financial centers, offering various Islamic financial products.
COMPOSED BY MR
KHAN
6. Qatar: Has a growing Islamic finance sector and emphasizes Shariah-compliant

practices.
7. Sudan: Previously implemented a more comprehensive version of the Islamic
economic system, but economic challenges have led to modifications over time.
It's worth noting that while these countries incorporate some elements of the Islamic
economic system, no country has implemented a pure form of the system in its entirety.
The level of implementation varies due to a combination of cultural, legal, and economic
factors.
FINANCIAL INTERMEDIARIES
 Financial Intermediaries are institutions that facilitate the flow of funds between
the savers (individuals who have extra) and borrowers (individuals who need
money). They play a crucial role in the consciously System by providing services
such as polling funds, assessing credit worthiness and managing risk.
I.e., bank, insurance companies etc.
EXAMPLE,
If you have extra money and your friend needs some extra money for starting a
business. Instead of giving your money to your friend you might feel safer giving it to a
trusted person who can make sure your friend pays you back. This trusted person is like
a middle man helping move money from people who have surplus and give it to the
people who need it. That middle man is called financial Intermediary. It can be a bank, a
person or a company that makes it easier and safer to borrow and lend money.
 Investment Bankers :
 Investment Bankers are like matchmakers for companies and investors. They help
companies raise capital by selling stock, bonds etc. to investors.
EXAMPLE,
A company wants to expand but needs more money, investment bankers step in and
give investors who are interested in putting their money into the company.
COMPOSED BY MR
KHAN
Simply, the investment banks connect investors with companies.

Functions of Investment Bankers
 Raising capital
 Work as Underwriters
 Merger and acquisition
 Trading and brokerage
 Research
 IPO
 Private placement
FINANCIAL MARKETS
 Financial markets are places where people can buy and sell different kinds of
financial assets, like stocks, bonds, currencies, and commodities. These markets
allow investors to trade these assets, and they play a vital role in connecting those
who have money to invest with those who need capital.
 Primary Market: The primary market is a place where new securities (like stocks
and bonds) are initially issued to the public. When a company wants to raise
money by issuing new shares of stock or new bonds, it does so in the primary
market. Investors buy these new securities directly from the company, and the
money goes to the issuing company.
 Secondary Markets: Secondary markets is a place where existing securities that
were previously issued in the primary market are bought and sold. These markets
allow investors to trade securities among themselves, without involving the
issuing company. The most common example of a secondary market is the stock
exchange, where shares of publicly traded companies are bought and sold by
investors.
In simple terms, financial markets are where financial assets are bought and sold. The
primary market is where new financial assets are issued to the public for the first time,
while secondary markets are where existing financial assets are traded between
investors.
COMPOSED BY MR
KHAN
TYPES OF FINANCIAL MARKETS:

1.CAPITAL MARKET:
 A capital market is a place where people buy and sell financial assets, like stocks
and bonds, to raise funds for companies or invest their money. It's like a
marketplace for investments. It involves Long-Term lending and borrowing.
 Stock Market: The stock market is where you can buy and sell shares of the
companies, which are called stocks or equities.
 Bond Market: The bond market is where you can buy and sell debt investments
issued by governments or companies, which are known as bonds.
2. MONEY MARKET:
 The money market involves short-term borrowing, lending, and trading of low-
risk, liquid financial assets, usually with maturities of less than one year.
 OTC Market: The OTC (Over-The-Counter) market is like a direct trading space
where buyers and sellers interact without needing a formal stock exchange. It's
more flexible but also less regulated.
 Forex Market: The forex market, also known as the foreign exchange market, is
where currencies are traded. It's like a global marketplace for buying and selling
different currencies. People, businesses, and governments exchange one currency
for another, aiming to profit from changes in exchange rates. It's one of the largest
and most liquid markets in the world.
MARKET EFFICIENCY
 The prosperity of resources allocation that maximizing total surplus received by all
members of the society is called Market Efficiency.
Market Efficiency Includes :
1. Consumer Surplus :
 It is the economic benefit or value that a consumer gains when they purchase a
product or service for a price lower than the maximum price they are willing to
COMPOSED BY MR
KHAN
pay. It represents the difference between what consumer are willing to pay for a
food and what they actually pay.
 Formula: ( Willing to pay - Actual Payment )
EXAMPLE:
 A consumer who is willing to pay up to 25k for a smartphone. However, they find
a deal and able to purchase the smartphone for 20k. The difference is called
consumer surplus. (25000 - 20000 = 5000).
2. Producer Surplus :
 It is the economic benefit or value that producer receive when they sell the
product for a price higher than their minimum price. This difference is called
producer surplus.
 Formula: ( Amount received - Actual Price )
3. Total Surplus:
 The sum of consumer surplus and producer surplus is called total surplus.
STOCK EXCHANGE
 A stock exchange is a place where traders buy and sell shares of companies,
among themselves. It is a secondary market where investors trade in existing
securities and company doesn't involve in this trade.
STOCK EXCHANGE IN PAKISTAN :
1. Karachi Stock Exchange :
 It was established on sep 18/1947
 Soon after the independence of Pakistan.
 Initially operated as a non profit organization.
 Recognized as stock exchange under securities and exchange in 1970.
2. Lahore Stock Exchange :
COMPOSED BY MR
KHAN
 Founded on October 1970.

 Aimed to provide a trading platform for securities in the punjab region.
 Began as a non profit organization.
3. Islamabad Stock Exchange :
 Established on October 28/ 1989
 Design to serve tge capital city and its surrounding.
 Began its operations as a non-profit organization.
 Played a role in promoting financial markets in the ICT.
THE PAKISTAN STOCK EXCHANGE :

 PSX is the main stock exchange in Pakistan
 It was formed in 2016 through the merger of the three separate stock exchange.
 PSX = KSE + LSE + ISE
 It plays a vital role in the financial system of Pakistan.
 It provides a platform for buying and selling of the public Limited companies
shares and bonds which are enlisted.
 It is regulated by ( SECP ).
Stock Exchange Securities :
 Stock exchange securities are financial instruments that are bought and sold on
a stock exchange. These securities represent ownership or a financial interest in
a company or other investment entity. The most common types of stock
exchange securities include:
STOCK
 A stock, also known as a share or equity, represents ownership in a company.

When you buy a stock, you're essentially purchasing a small portion of that
company. Stockholders may have the right to vote on certain company decisions
and may receive dividends if the company distributes profits. Stocks are typically
bought and sold on stock exchanges.
COMPOSED BY MR
KHAN
TYPES OF STOCK:
1 Common Stock :
 Common stock represents a form of ownership in a corporation. When you hold
common stock, you become a shareholder and own a piece of the company.
 This ownership typically comes with voting rights, allowing you to participate in
important corporate decisions at shareholder meetings.
 Common stockholders may also receive dividends, which are a portion of the
company's profits distributed to shareholders. However, these dividends are not
guaranteed and can vary depending on the company's performance and
management decisions.
 Common stockholders have the potential for capital appreciation, meaning the
value of their shares can increase over time, but they also bear the most risk in
case of financial difficulties or bankruptcy, as they are last in line to receive
assets after debt holders and preferred shareholders.
2 Preferred Stock :
 Preferred stock is another form of equity ownership in a corporation, but it differs
significantly from common stock.
 Preferred shareholders do not typically, have voting rights or have limited voting
rights, meaning they don't participate in corporate decisions like common
shareholders.
 Preferred stockholders are entitled to receive fixed dividends at predetermined
intervals. These dividends must be paid before any dividends are distributed to
common shareholders, making preferred stock a more stable income-generating
investment.
 In the event of a company's liquidation, preferred stockholders have a higher
claim on the company's assets compared to common shareholders, providing
some protection .
 Preferred stock usually has less potential for capital appreciation compared to
common stock. Some preferred stocks are convertible, which means they can be
exchanged for a specific number of common shares under certain conditions,
providing an opportunity for investors to benefit from potential common stock
gains.
CONCLUSION
COMPOSED BY MR
KHAN
common stock provides ownership with voting rights and the potential for higher
returns but comes with more risk and variable dividends. Preferred stock, on the other
hand, offers a stable income stream with fixed dividends, higher asset claim in
liquidation, but generally lacks voting rights and may have limited capital appreciation
potential. Investors choose between these two types of stock based on their financial
goals, risk tolerance, and income preferences.
BOND
 A bond is a debt security that represents a loan made by an investor to a

borrower. When you purchase a bond, you are essentially lending money to a
company in return of a periodic interest and repayment of the principal amount
after maturity.
BOND TERMINOLOGIES :
1. Face Value : The nominal value of bond which is the amount that will be repaid
to the bondholder when the bond matured.
2. Coupon Rate : The Fixed amount interest rate that the issuer pays to the
bondholders usually expressed as a percentage of the face value.
3. Maturity Date : The date when the bond will matured. And the issuer will repay
the face value to the bondholder.
4. Issuer : The company or government who issue bond to the general public is
called issuer.
5. Bondholders : The investor who purchase bond of the company or government
is called bondholder.
6. Coupon Payment : The periodic interest payment made to the bondholders
semi-annually or annually.
7. Yield : The yield represents the annual return on bond. Taking into account the
interest payment and market price of the bond.
COMPOSED BY MR
KHAN
8. Callable Bond : A bond that the issuer can redeem ( call before ) before its
maturity, usually at a specific rate.
9. Puttable Bond : A bond that give the bond holder an option to sell the bond or
back to the issuer before maturity at a pre-determined price.
10.Bond Market : The market place where bonds are traded. Bonds are sold and
purchase either in the stock exchange or Over the Market (OTC) transaction.
TYPES OF BONDS :
 There are various types of bonds, some them are as given below:
1. Secured Bond : A bond that is backup by a specific asset or by all assets. If the
issuer fails to make payment, a bondholder has claim on assets of the
organization.
2. Unsecured Bond : It is also called naked bond. It is not backup by any asset of the
organization. It is just a promise; the bondholder has no claim on the
organization's assets.
3. Zero Coupon Bond : A bond that doesn't pay periodic interest. Instead, it is sold on
discount and redeem on face value or premium.
4. Extendable Bond : A bond that allow the issuer or bondholder to extend the bond
maturity date.
5. Retractable Bond : A bond that gives the bondholders the option to redeem the
bond to the issuer before its maturity.
6. Inflation linked Bond : A bond where the principal and the interest payments are
adjusted based on changes in the inflation rate.
7. Convertible Bond : A bond that can be converted into a number of shares after a
specific time.
8. Non Convertible Bond : A bond that can't be converted into shares ever.
9. Perpetual Bond : A bond with no maturity date. It is issue for indefinite time.
10.Municipal Bond : A bond issued by municipal or local government.
11.Gov.t Bond : A bond issued by government
E.g.; federal Gov.t or national Gov.t to raise fund for various purposes. They are typically
low risk investment.
COMPOSED BY MR
KHAN
CERTIFICATE OF DEPOSITS
 A Certificate of Deposit (CD) is a financial product offered by banks and credit

unions that allows you to deposit a specific amount of money for a fixed period of
time at a predetermined interest rate. Here are its types, features, characteristics,
and functions:
TYPES OF CDS:
1. Traditional CD: This is the most common type, where you deposit a lump sum
for a fixed term, typically ranging from a few months to several years.
2. High-Yield CD: Offers a higher interest rate than traditional CDs, but often
requires a larger initial deposit and longer commitment.
3. Jumbo CD: Designed for larger deposits, usually starting at $100,000 or more,
and offers higher interest rates than traditional CDs.
4. Bump-up CD: Allows you to request a higher interest rate during the CD's term
if market rates increase.
5. Callable CD: Gives the issuing bank the right to "call back" the CD before its
maturity date, which can be a disadvantage for the investor.
FEATURES AND CHARACTERISTICS:
Fixed Interest Rate: CDs offer a fixed interest rate for the entire term, providing
predictable returns.
Maturity Date: CDs have a specific maturity date when you can withdraw your
principal and earned interest without penalty.
Penalties: If you withdraw funds before the CD's maturity, you may face penalties,
typically in the form of forfeiting some interest.
Low Risk: CDs are considered low-risk investments because they are typically insured
by the FDIC (up to certain limits) for banks or by the NCUA for credit unions.
Liquidity: CDs are less liquid than regular savings accounts since you can't easily
access your money without penalties before maturity.
Interest Payment: Interest can be paid out periodically (e.g., monthly, quarterly) or at
maturity, depending on the CD terms.
COMPOSED BY MR
KHAN
FUNCTIONS:
Savings and Investment: CDs provide a safe way to save and invest money, especially
for short-term or medium-term financial goals.
Income Generation: Investors looking for a predictable source of income often use
CDs as they offer fixed interest payments.
Diversification: CDs can be part of a diversified investment portfolio, providing
stability and low-risk assets.
Capital Preservation: They help preserve capital while earning some interest, making
them suitable for risk-averse investors.
Emergency Fund: CDs can be used as part of an emergency fund, ensuring access to
funds in case of unexpected expenses.
 ADVANTAGES AND DISADVANTAGES:

 Certificate of Deposits (CDs) have both advantages and disadvantages:
ADVANTAGES:
Safety: CDs are typically offered by banks and credit unions, making them a low-risk
investment. Your principal amount is usually insured up to a certain limit by the FDIC
or NCUA, providing a level of safety.
Fixed Interest Rate: CDs offer a fixed interest rate for a specified term, providing
predictability and protection against market fluctuations.
Higher Interest Rates: Compared to regular savings accounts, CDs often offer higher
interest rates, especially for longer-term CDs.
Variety of Terms: CDs come in various terms, allowing you to choose the one that
suits your financial goals, from a few months to several years.
Guaranteed Returns: You're guaranteed to receive your initial deposit plus interest
when the CD matures, as long as you don't withdraw before the term ends.
DISADVANTAGES:
COMPOSED BY MR
KHAN
Limited Liquidity: Unlike savings or checking accounts, CDs tie up your money for a
fixed period. Early withdrawals may result in penalties and loss of interest.
Opportunity Cost: Since CD rates are fixed, you may miss out on potentially higher
returns if market interest rates rise during your CD's term.
Inflation Risk: If the interest rate on your CD is lower than the inflation rate, your
purchasing power may decrease over time.
Minimum Deposit: Many CDs require a minimum deposit, which might be higher
than what's required for other types of accounts.
Penalty for Early Withdrawal: If you need to access your funds before the CD
matures, you'll likely incur penalties, which can eat into your returns.
Interest Income Taxation: You'll need to pay taxes on the interest earned from CDs,
potentially reducing your overall returns.
Ultimately, the suitability of CDs depends on your financial goals, risk tolerance, and
need for liquidity. They can be a valuable part of a diversified investment portfolio but
may not offer the same growth potential as riskier assets like stocks.
IN SUMMARY, Certificate of Deposits come in various types with fixed interest rates and
maturity dates, making them low-risk savings and investment options. They offer a safe
way to earn interest and are commonly used for savings, income generation, and capital
preservation.
CORPORATE BOND
 A corporate bond is a type of bond issued by a company or corporation as a

means to raise capital. When a company issues a corporate bond, it is essentially
borrowing money from investors or bondholders. In return, the company agrees
to pay periodic interest payments (coupon payments) to the bondholders and
return the bond's face value (principal) when the bond matures. Corporate bonds
are a common way for companies to secure long-term financing and are typically
used for various purposes, including funding expansion, capital projects, or
COMPOSED BY MR
KHAN
refinancing existing debt. The creditworthiness of a corporate bond is based on

the financial stability and credit rating of the issuing company.
CORPORATE SHARES
 A Corporate stock is , also known as company stock, represents ownership in a

corporation, and it is typically divided into shares. These shares can be issued to
the public and can take the form of common shares and preferred shares.
Risk
 Risk refers to the uncertainty or potential for loss or harm in various situations,
including financial investments. It involves the chance that the actual outcome will
differ from what is expected. In finance, risk can take many forms, such as market
risk (fluctuations in asset prices), credit risk (the likelihood of borrowers defaulting
on loans), and operational risk (risks associated with internal processes and
systems).
 Credit Risk:
 Credit risk, also known as default risk, is the risk that a borrower or issuer of debt
securities (like bonds) will fail to make interest payments or repay the principal
amount as agreed. It's a key concern for lenders and investors because it can lead
to financial losses if the borrower defaults on their obligations.
PORTFOLIO
COMPOSED BY MR
KHAN
 A portfolio is a collection of financial investments and assets held by an individual,

institution, or entity. It is a diversified mix of securities, such as stocks, bonds,
mutual funds, real estate, and other investments, with the goal of achieving
specific financial objectives while managing risk.
Example: Imagine you are an individual investor looking to build a portfolio. Here's a
simplified example:
Stocks: You decide to invest in shares of several different publicly traded companies.
You buy shares in Company A, Company B, and Company C. This forms the stock portion
of your portfolio.
Bonds: To add stability and income to your portfolio, you purchase government bonds
and corporate bonds. These bonds pay you interest regularly, providing a steady income
stream.
Cash: You also keep some cash in a savings account. While it doesn't provide high
returns, it's readily available for emergencies or new investment opportunities.
Real Estate: You invest in a real estate investment trust (REIT), which gives you exposure
to the real estate market without owning physical properties.
CONCLUSION: By combining these different types of investments, you create a

diversified portfolio. If one sector, such as stocks, experiences a downturn, your bond
investments or real estate holdings may help offset those losses. The goal is to achieve a
balance that aligns with your financial objectives, risk tolerance, and time horizon. Over
time, you can adjust your portfolio to reflect changes in your goals or market conditions.
COMPOSED BY MR
KHAN
MID TERM
COMPOSED BY MR
KHAN
FINANCIAL INSTITUTIONS
 A financial institution is a business or organization that provides a range of

financial services to its customers, including banking, lending, investing, and more.
Examples of financial institutions include banks, credit unions, insurance
companies, brokerage firms, and investment funds. These institutions play a
critical role in the global economy by facilitating the flow of money and the
allocation of capital.
FUNCTIONS:
 Financial institutions perform a wide range of functions in the financial system and
economy. Here are some of their primary functions:
Intermediation: Financial institutions act as intermediaries between those who
have excess funds (savers or depositors) and those who need funds (borrowers).
They facilitate the transfer of funds from savers to borrowers.
Deposit-Taking: Banks and credit unions accept deposits from individuals and
businesses, providing a safe place to store money. These deposits can be in the
form of savings accounts, checking accounts, certificates of deposit, and more.
Lending: Financial institutions provide loans and credit to individuals, businesses,
and governments. This lending can take various forms, such as personal loans,
mortgages, business loans, and government bonds.
Payment Processing: They offer payment services, including check processing,
electronic fund transfers, and credit card services, making it easier for people and
businesses to engage in transactions.
Risk Management: Financial institutions offer insurance products to help
individuals and businesses mitigate risks associated with events like accidents,
illnesses, and property damage.
Wealth Management: They provide services for managing and investing money,
including portfolio management, financial planning, and investment advisory
services.
Capital Formation: Financial institutions facilitate the allocation of capital to
productive purposes by channeling funds from savers to businesses and projects
that need financing.
COMPOSED BY MR
KHAN
Securities Trading: Investment banks and brokerage firms facilitate the trading of
stocks, bonds, and other financial instruments on financial markets.
Foreign Exchange Services: Many financial institutions offer services related to
currency exchange and foreign exchange trading.
Facilitating Economic Growth: Financial institutions play a crucial role in fostering
economic growth by providing the necessary financial resources and expertise to
individuals and businesses.
Monetary Policy Implementation: Central banks, which are a type of financial
institution, play a key role in implementing a country's monetary policy and
regulating the money supply.
Safekeeping of Assets: Some financial institutions, like custodian banks, specialize
in safeguarding and managing assets on behalf of clients, such as investment
funds.
Financial Advice: They offer financial advisory services to help clients make
informed decisions about investments, retirement planning, and other financial
matters.
 These functions are essential for the efficient operation of the financial system
and for promoting economic growth and stability. Different types of financial
institutions may specialize in specific functions or offer a combination of services.
TYPES OF FINANCIAL INSTITUTIONS
 These are different types of financial institutions:

1. Commercial Bank:
 A commercial bank is a financial institution that provides a wide range of banking
services to individuals and businesses. This includes services like checking and
savings accounts, loans, and basic financial products.
2. Investment Bank:
 Investment banks focus on helping businesses raise capital by issuing stocks and
bonds. They also provide advisory services for mergers and acquisitions, and they
engage in trading and asset management.
3. Insurance Company:
COMPOSED BY MR
KHAN
 Insurance is a contractual arrangement between two parties, where the insurer

agrees to provide financial protection or indemnity to the insured in the event of
specified losses or risks in exchange for premium payments.
 An insurance company offers various insurance products, such as life, health,
auto, and property insurance. Customers pay premiums to the insurance company
in exchange for coverage and financial protection.
TYPES OF INSURANCE:
i. Fire Insurance: Fire insurance provides coverage for damage or loss caused by
fires to the insured property.
ii. Life Insurance: Life insurance pays out a benefit to the beneficiary upon the death
of the insured person, providing financial protection and support to the family.
iii. Marine Insurance: Marine insurance offers coverage for goods, cargo, and vessels
during sea voyages, protecting against losses due to various risks encountered in
maritime transport.
4. Brokerage Firm:
 Brokerage firms facilitate the buying and selling of securities, such as stocks,
bonds, and mutual funds, on behalf of their clients. They act as intermediaries in
financial markets.
Each of these institutions plays a distinct role in the financial sector and serves
different financial needs.
FINANCIAL INTERMEDIATION
 Financial intermediation is the process by which financial institutions, such as

banks, credit unions, and investment firms, act as intermediaries between savers
and borrowers in an economy. These intermediaries facilitate the flow of funds
from those who have excess capital (savers) to those who need capital
(borrowers). They do this by accepting deposits from savers and then lending
those funds to borrowers, or by providing various financial services that help
connect savers and borrowers. Financial intermediation plays a crucial role in the
efficient allocation of resources and the overall functioning of the financial system.
COMPOSED BY MR
KHAN
Absorbing Credit Risk:

 Absorbing credit risk means taking on the possibility that someone might not pay
back the money they borrowed. For example, if a bank gives a loan to a customer,
they are absorbing the credit risk because if the customer can't repay the loan,
the bank will lose money.
How to Reduce Chances of Risk:
 Here are the strategies to reduce credit risk with simplified explanations:
Credit Analysis: Carefully check if borrowers can repay.
Diversification: Don't put all eggs in one basket; spread the risk.
Collateral: Ask for something valuable as a backup.
Loan Agreements: Set financial conditions for borrowers.
Regular Monitoring: Keep an eye on borrower performance.
Adjust Rates: Charge more to riskier borrowers.
Credit Insurance: Protect against borrower defaults.
Follow Rules: Stick to financial regulations.
Clear Policies: Make rules for managing risk.
Expert Advice: Use credit rating agencies.
Plan for Defaults: Be ready for borrowers who can't pay.
Good Agreements: Write clear and strong contracts.
 By following these steps, you can lower the chance of credit problems.
The Prudence Concept In Accounting:
 The prudence concept in accounting means considering expected losses when you
anticipate they might occur but not recognizing profits until they are actually
realized, ensuring a cautious and conservative approach in financial reporting.
BANK
 A bank is a financial institution which deals with money and credit. It is organized
on a joint stock company system primarily for the earning of profit. Commercial
bank accepts deposits from individuals, firms and companies at a lower rate of
interest and gives at higher rate of interest to those who need them. The
COMPOSED BY MR
KHAN
difference between the terms at which it borrows and those at which it lends
forms the source of its profit A bank thus, is a profit earning institute.
 According to Crowther, "A bank is a firm which collects money from those who
have it spare. It lends money to those who require it."
In the words of
 Mr. Parking. "A bank is a firm that takes deposits from households and firms and
makes loans to other households and firms".
FUNCTIONS:
 A commercial bank performs a variety of functions. These functions are classified
under two main heads (1) Basic Functions and (2) Secondary Functions
1. BASIC FUNCTIONS:
 The basic functions of a commercial bank are (a) accepting of deposits and (b)
advancing of money
(A) Accepting of Deposits:
 The first important function of a bank is to accept deposits from these who can
save but cannot make profitable use of their savings themselves, in order to
attract the savings from different persons and institutions, the bank maintains the
following three types of accounts
i. Current Account: The businesses and traders usually maintain their funds in
current account Current account is one where money is constantly being drawn
out and put in Since the money is withdrawable at anytime by the customer
therefore, the banks usually do not pay interest on current deposits Current
account holders receive a cheque book and regular statements containing details
of money paid in and paid
ii. Saving Account: The aim of this account is to encourage and mobilize savings of
the people Saving account is generally opened by persons of small income. The
banks pay interest on this type of deposits However the banks normally place
restrictions on their frequent withdrawal
iii. Fixed Deposit Account: Fixed deposits are kept with the banks for a specified
period of time. The rate of interest on fixed deposit (also called term deposits) are
fairly high. The longer the period of deposit, the higher is the interest rate.
(B) Making Loans:
COMPOSED BY MR
KHAN
 The second major function of commercial banks is to make loans to businessmen,

traders, exporters, household, etc. Making loans is a fundamental function of
commercial banks, and it plays a vital role in facilitating economic activities by
providing access to capital for individuals and businesses. The strength of a bank
primarily judged by the soundness of its advances.
 The lending of money may be in any of the following forms:
 Loans: The commercial banks grant short and long term loan to individuals, firms
and companies and mostly against securities. The amount of loan is credited to
the borrower's account who withdraws it as per his requirements.
 Cash Credit: It is very common form of borrowing by business concerns.Cash
credit is a financial arrangement provided by commercial banks to their
creditworthy customers. It allows businesses to borrow funds up to a certain limit,
typically secured by the business's assets or receivables. This facility enables the
borrower to withdraw and repay funds as needed. The interest is charged only on
the amount of money withdrawn by the borrower.
 Overdraft: An overdraft is a financial arrangement in which a bank or financial
institution allows an account holder to withdraw or spend more money than is
currently available in their account. Overdrafts are often used to cover short-term
financial gaps or unexpected expenses.
 Discounting Bills: The bank also makes loans to their customers by discounting bill
of exchange. Discounting of bills refers to making the payment of bill before its
maturity. The discount charged is thequantitative earnings of the bank. The
premature payment made is a loan to the holder of the bills by bank is considered
a safe, certain and liquid form of bank lending.
2. SECONDARY FUNCTIONS:
 The secondary functions of a bank is classified as (a) Special Financial Services
and (b) Agency Functions.
(A) Special Financial Services:
 Today's businesses are highly competitive. It is not enough for the banks now to
accepts deposits and make loans. Banks are now offering international services
such as currency exchange, issue of letters of credit, banker's acceptances. Most
of the commercial banks are also offering ATMs and Electronic Fund Transfer
(EFT).
(B) Agency Functions:
COMPOSED BY MR
KHAN
 Banks acts as agentsfor their customers in various ways as;

i. Collection of Cheques: It acts as agent to its customers in the collection and
payment of cheques, bills and promissory notes.
ii. Collection of Dividends: The bank provides a very useful service in the collection
of dividends ir interest earned on shares held by its customers.
iii. Purchase or Sale of Securities: The bank, if authorized by its customer, purchases
or sale securities on his behalf and thus adds another benefit to its portfolio.
iv. Execution of Standing Instructions: The customer may order in writing to his bank
to make payments of regularly recurring nature to an individual or firm by
debiting them to his account. The bank will make payments and charge a small
commission. The payments will be stopped on written instructions of the
customer only.
v. Acting as Trustee or Executor: If a client direct his bank to act as trustee or
executor in the administration of a will or in anythe business settlement requiring
a technical knowledge, then the will take this responsibility also for the benefit of
its customers and charge a small fee for providing this essential services.
IMPORTANCE OF COMMERCIAL BANK:
 Commercial banks play a crucial role in the economy.some of the important points
of the commercial bank are as follow:
1. Financial Intermediation: They act as intermediaries between depositors and
borrowers to transfer funds from savers to those who need capital for various
purposes, stimulating economic activity.
2. Credit Creation: Commercial banks can create money through the process of
fractional reserve banking , which involves lending out a portion of the deposits
they receive, thus contributing to the expansion of the money supply.
3. Safekeeping of Deposits: They provide a secure place for individuals and
businesses to deposit their money, reducing the risk of theft or loss.
4. Payment and Settlement: Commercial banks facilitate transactions through
services like checks, debit/credit cards, and electronic fund transfers, ensuring the
smooth flow of funds in the economy.
5. Interest Rate Management: They influence interest rates by adjusting the
supply of money in the economy, which can have a significant impact on inflation
and economic stability.
COMPOSED BY MR
KHAN
6. Financial Services: Commercial banks offer a wide range of financial services,

including loans, mortgages, investment opportunities, and foreign exchange
services, which support economic growth and development.
7. Support for Small Businesses: They play a crucial role in providing capital and
financial services to small and medium-sized enterprises (SMEs), which are vital
for job creation and economic growth.
8. Economic Growth: The overall health and stability of the banking sector are
closely linked to the economic well-being of a country. Commercial banks, through
their various functions, contribute to economic growth and prosperity.
In summary, commercial banks are essential components of the financial system,
supporting economic growth, facilitating transactions, and providing a range of financial
services that are vital for individuals, businesses, and the overall stability of the
economy.
CENTRAL BANK
 A central bank is a financial institution responsible for overseeing and managing a

country's monetary policy and currency. It typically regulates the money supply,
controls interest rates, and often acts as a lender of last resort to stabilize the
financial system. Central banks play a crucial role in maintaining economic stability
and managing inflation. Examples include the Federal Reserve in the United States
and the European Central Bank in the Eurozone.
CENTRAL BANK OF PAKISTAN:
 The central bank of Pakistan is the State Bank of Pakistan (SBP). It is the country's
central monetary authority responsible for regulating and overseeing the banking
and financial system, controlling the money supply, and formulating and
implementing monetary policy. The State Bank of Pakistan plays a crucial role in
maintaining the stability of Pakistan's financial and economic system.
HISTORY OF SBP:
 Established in 1948 after Pakistan's independence.
 Early focus on currency issuance and banking sector oversight.
COMPOSED BY MR
KHAN
 Headquarters shifted to Islamabad in 1962.

 Played a role in economic planning and development.
 Regulates and supervises the banking sector.
 Formulates and implements monetary policy.
 Manages financial crises and maintain financial stability.
 Engages internationally in economic matters.
 Supports economic development and planning.
FUNCTIONS:
 The State Bank of Pakistan (SBP) performs various functions to ensure the stability
and integrity of Pakistan's financial and monetary systems. Some of its key
functions include:
1. Monetary Policy: Formulating and implementing monetary policy to control
inflation, stabilize the economy, and promote growth. This includes setting
interest rates and managing the money supply.
2. Currency Issuance: Issuing and regulating the country's currency, ensuring an
adequate supply of money in the economy.
3. Banking Sector Regulation: Regulating and supervising banks and financial
institutions to maintain the stability and integrity of the banking system.
4. Foreign Exchange Management: Managing foreign exchange reserves to
support international trade and maintain exchange rate stability.
5. Economic Research: Conducting economic research and analysis to support
informed policymaking and economic development.
6. Financial Stability: Ensuring the stability and resilience of the financial system,
especially during times of financial crises.
7. Payment Systems: Overseeing payment systems to facilitate efficient and secure
transactions within the country.
8. Government Banking: Serving as the banker to the government and managing
its accounts and transactions.
9. Lender of Last Resort: Acting as a lender of last resort to provide liquidity
support to financial institutions facing distress.
10. Consumer Protection: Ensuring consumer protection in the financial sector
and addressing consumer complaints.
11. International Engagement: Representing Pakistan in international financial
institutions and playing a role in managing Pakistan's extern al economic relations.
COMPOSED BY MR
KHAN
These functions collectively make the SBP a pivotal institution for maintaining financial
and economic stability in Pakistan.
 CENTRAL BANK'S MONOPOLY OF NOTE ISSUE
 Monopoly of Note Issue One of the very important functions of the early banks
which to issue their own notes This led to much confusion and widespread
distress among the people because banks began to over issue notes They could
not honour the cheques drawn upon them and so they were put to trouble many
times The history of note issuing banks in the early periods of banking
development is a long record of failures because they could not keep adequate
resources against the deposits When over long years experience it was found that
the business of note issue could not be discharged by the commercial banks, it
was finally handed over to the chief bank of the country the Central Bank in every
country of the world now the central bank has the sole right o note issue The
concentration of note
ADVANTAGES:
1. Uniformity In Note Circulation: It brings uniformity in the circulation of currency
2. Control Over Money Supply: The central bank is in a better position to exercise
control over the money supply in the country
3. Control Over Commercial Banks: The sole power to issue notes enables the
central bank to control the lending operations of the commercial banks
4. Public Confidence: The right of note issue is regulated by law Therefore
increases public confidence in the monetary system of the country
PRINCIPLES OF NOTE ISSUE:
 There are two principles of note issue, one is called the Currency Principle and the
other is named as Banking Principle Both these principles are contradictory to
each other.
(1). Currency Principle:
COMPOSED BY MR
KHAN
 According to the currency principle, the central bank of the country should keep
100% gold for every note issued in other words, their should be full convertibility
for the amount of legal tender currency. It assumes full convertibility of notes.
 The advocates of this principle of note issue are of the view that the currency
under this system will expand or contract as it would have expanded or contracted
under the metallic money The currency principle assures maximum safety for the
notes Those who oppose this principle assert that the system no doubt gives
safety to the currency but it lacks elasticity The supply of notes is tied down to the
supply of gold available in the country This system also fails to take into
consideration the commercial banks power to create credit
(2). Banking Principle:

 According to this principle, there is no need to keep 100% gold or silver against
notes issued The notes issued should have a guarantee of convertibility into gold.
It is sufficient to keep only a certain percentage of total paper currency in the form
of gold and silver reserves. The notes issued in the country should be according to
the needs of trade and industry If at any time, there is an excess of notes issued to
the requirements of trade and industry, these will be returned to the bank of issue
for conversion.
MERITS:
 The principle of note issue has the merit that it provides the country with an
elastic currency The guarantee of convertibility also acts as a regulator of note
issue Since it does not require 100% metallic backing against the note issue, it is
therefore most economical principle .
DEMERITS:
 The demerit of this principle is the danger of over issue of notes possibility of
Inconvertibility of excess notes, loss of public confidence in the Currency and
monetary instability
METHODS OF NOTE ISSUE:
 Both the principles of note issue mentioned above have serious defects The
Monetary experts by coordinating the advantages of both the principles have
COMPOSED BY MR
KHAN
evolved systems or methods of notes issue. The main systems of note issue
prevalent in afferent countries of the world are (1) Partial Fiduciary System (2)
Proportional Reserve (3)Minimum Reserve System
 These systems are now discussed in brief:
(1). FIXED FIDUCIARY SYSTEM:

 Under this system, a fixed amount is laid down by law which need to be covered
by government securities Notes issued in excess of this mount must be fully
backed by gold. England adopted this system in 1844 The system lacked elasticity
and was not capable of satisfying the needs of trade and industry. This system was
abandoned in 1913 in favour of proportional reserve system
(2). PROPORTIONAL RESERVE SYSTEM:
 Under this system the central bank is to keep a certain percentage of the total
notes issued in gold The remainder is to be covered by sound government
securities, trade bills etc. This system remained prevalent in USA Great Britain and
over a large part of the world. The proportional reserve system was also adopted
by State Bank of Pakistan (SBP) and it remained enforced til December 1965 This
system was abandoned in 1965 as it was rigid and lacked elasticity The State Bank
of Pakistan could not give guarantee for full convertibility of notes The State Bank
of Pakistan has now adopted a new system of note issue named as Minimum
Reserve System
(3). MINIMUM RESERVE SYSTEM:
 The proportional reserve system of note issue has been replaced by minimum
reserve system in Pakistan in 1965 According to this system the central bank is
required to keep only a minimum amount of reserve in the form of gold and
foreign exchange securities The central bank can expand note issue in accordance
with the volume of business activities without backing of gold The level of
currency backing by gold was fixed at Rs 1200 million in Pakistan. The mere of ha
system is that it ensures an adequate supply of currency to meet the business
demands of the country. In other words, the method of note issue is sufficiently
wlastic The demerit is that paper currency issued is practically inconvertible in this
System
COMPOSED BY MR
KHAN
 INTERNATIONAL MONETARY FUND: (IMF)
 The International Monetary Fund (IMF) was the outcome of Bretton Wood
Agreement signed by 44 major countries of the world in July 1944 in USA.
ORGANIZATION:
 IMF is an autonomous organization and is affiliated to UNO. The management of
the Fund is under the control of two bodies (a) Board of Governor and (b) Board
of Executive Directors. The Board of Governor is the general body of management.
It has the responsibility of formulating the general policies of the Fund. The Board
of Executive Directors is responsible for the day to day business of the Fund
MEMBERSHIP:
 All those countries which agree to subscribe to Funds Article of Agreement are
eligible to Funds Membership. The membership to the Fund has risen from 44
nations to 183.
QUOTAS:
 Each of the members of IMF is required to contribute a quota to the Fund. The
size of quota depends upon the national income of the country and upon its share
in international trade. The quota is made up of 75% in the country's own currency
and 25% in gold Members quotas are now supplemented by an allocation of
Special Drawing Rights. (SDRs)
SPECIAL DRAWING RIGHTS: (SDR)
 The IMF for the first time in 1967 issued special drawing rights (SDR's) to
governments to settle international debts They have now replaced gold in
international markets They are thus paper substitutes for gold and function as
international reserves When they were initially introduced they were linked to
dollar SDR1 = $1 Now the value of one unit of SDR is calculated by combining the
value of leading five currencies of the world. They are the new type of
international money.
COMPOSED BY MR
KHAN

WORLD BANK
 The World Bank is an international financial institution that provides financial and
technical assistance to developing countries for development projects (such as
infrastructure, education, healthcare, and environmental sustainability) that are
expected to improve the economic prospects and quality of life for people in
those countries. The goal is to reduce poverty and support sustainable
development.
Key points about the World Bank:
FORMATION:
 The World Bank was established in 1944 and began operations in 1946. It is part
of the World Bank Group, which also includes other institutions like the
International Finance Corporation (IFC), the Multilateral Investment Guarantee
Agency (MIGA), and the International Centre for Settlement of Investment
Disputes (ICSID).
MEMBERSHIP:
 The World Bank has 189 member countries (as of my knowledge cutoff in January
2022). The members are the shareholders of the bank and determine its policies
through the Board of Governors and the Board of Executive Directors.
PURPOSE:
 The primary purpose of the World Bank is to provide financial and technical
assistance to developing countries for development projects. These projects are
typically aimed at improving infrastructure, healthcare, education, and other
areas that contribute to economic development.
FUNDING:
COMPOSED BY MR
KHAN
 The World Bank raises funds from member countries through the issuance of
bonds and from its own capital. It then lends these funds to developing countries
at low-interest rates or provides grants, depending on the financial situation of
the borrowing country.
FOCUS AREAS:
 The World Bank addresses a wide range of development issues, including poverty
reduction, economic development, social progress, and environmental
sustainability. It tailors its support to the specific needs and circumstances of each
country.
GOVERNANCE:
 The World Bank is governed by its member countries. The President of the World
Bank is typically nominated by the United States, which is the largest single
shareholder, while the Managing Director of the International Monetary Fund
(IMF) is usually nominated by European countries.
CRITICISM:
 The World Bank has faced criticism over the years for various reasons, including
concerns about the conditions attached to loans, the impact of projects on the
environment and local communities, and the governance structure that some
argue does not adequately represent the interests of all member countries.
The World Bank plays a significant role in global development efforts and collaborates
with various international organizations, governments, and non-governmental
organizations to address global challenges and promote sustainable development.
 INTERNATIONAL FINANCE CORPORATION (IFC)
 International Finance Corporation was established in 1956. Its main function is to

provide finance for industrial projects to the private enterprises in developing
countries.
COMPOSED BY MR
KHAN
 The IFC is affiliated to the World Bank. However, it possesses a legal entity with
separate fund and functions. The IFC provides capital for establishment of
industries which contribute to the economic development of the country. The
important industries which are financed by IFC are iron and steel mining,
fertilizers, paper textile etc.
 The IFC loans are disbursed in lump sum or in installments on the rate of interest
mutually agreed by IFC and member country. The loan is repayable in a period of 5
to 15 years.
ISLAMIC DEVELOPMENT BANK
 The Islamic Development Bank was set up at Jaddah in 1975.

 It has 28 founder members. Now the membership has increased to 42 countries.
CAPITAL:
 The authorized capital of the IDB is 2000 million Islamic Dinars and the subscribed
capital is 1820 million Islamic Dinars.
ASIAN DEVELOPMENT BANK (ADB)
 The Asian Development Bank (ADB) was established on December 4, 1966 with an
authorized capital of 58 billion dollars. The purpose of setting up ADB was to lend
funds, promote investment and provide technical assistance to the countries
mainly in Asian region. The ADB has two main features:
 Firstly, it is an Asian Bank, secondly the membership of the bank now extends
beyond the Asian region also. It has 16 non-regional donor nations led by the USA.
COMPOSED BY MR
KHAN

Cap Markets in Pak

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Cap Markets in Pak

Uploaded by

Copyright:

Available Formats

1 CAPITAL MARKETS IN PAKISTAN

 Financial system refers to the complex network of institutions, Markets and

 They provide your loan, manage deposits and facilitate transactions.

 Rich and poor gap can become big.

3. MIXED ECONOMIC SYSTEM:

Four Countries with Mixed Economic Systems:

4. ISLAMIC ECONOMIC SYSTEM:

 Equitable Distribution: Focuses on distributing wealth fairly among all members

6. Qatar: Has a growing Islamic finance sector and emphasizes Shariah-compliant

Simply, the investment banks connect investors with companies.

TYPES OF FINANCIAL MARKETS:

 Founded on October 1970.

THE PAKISTAN STOCK EXCHANGE :

 A stock, also known as a share or equity, represents ownership in a company.

 A bond is a debt security that represents a loan made by an investor to a

 A Certificate of Deposit (CD) is a financial product offered by banks and credit

 ADVANTAGES AND DISADVANTAGES:

 A corporate bond is a type of bond issued by a company or corporation as a

refinancing existing debt. The creditworthiness of a corporate bond is based on

 A Corporate stock is , also known as company stock, represents ownership in a

 A portfolio is a collection of financial investments and assets held by an individual,

CONCLUSION: By combining these different types of investments, you create a

 A financial institution is a business or organization that provides a range of

TYPES OF FINANCIAL INSTITUTIONS

 These are different types of financial institutions:

 Insurance is a contractual arrangement between two parties, where the insurer

 Financial intermediation is the process by which financial institutions, such as

Absorbing Credit Risk:

 The second major function of commercial banks is to make loans to businessmen,

 Banks acts as agentsfor their customers in various ways as;

6. Financial Services: Commercial banks offer a wide range of financial services,

 A central bank is a financial institution responsible for overseeing and managing a

 Headquarters shifted to Islamabad in 1962.

 CENTRAL BANK'S MONOPOLY OF NOTE ISSUE

(2). Banking Principle:

(1). FIXED FIDUCIARY SYSTEM:

 INTERNATIONAL MONETARY FUND: (IMF)

 INTERNATIONAL FINANCE CORPORATION (IFC)

 International Finance Corporation was established in 1956. Its main function is to

ISLAMIC DEVELOPMENT BANK

 The Islamic Development Bank was set up at Jaddah in 1975.

ASIAN DEVELOPMENT BANK (ADB)

You might also like