The financial system facilitates transfer of funds, through financial institutions, financial

markets, financial instruments and services. Financial institutions act as mobilisers and
depositories of savings, and as purveyors of credit or finance. They also provide various
financial services to the community. They act as intermediaries between savers and
investors. All banks and many non-banking institutions also act as intermediaries, and are
called as non-banking financial intermediaries (NBFI). Financial institutions are divided
into the banking and non-banking ones. The distinction between the two has been
highlighted by characterizing the former as creators of credit, and the latter as mere
purveyors of credit.Fi nanci al Sect or i n Paki s t an pos s es s es a wi de s pect r um
of f i nanci al i ns t i t ut i ons -
C o m m e r c i a l b a n k s , s p e c i a l i z e d b a n k s , n a t i o n a l s a v i n g s s c h e
m e s , i n s u r a n c e c ompani es , devel opment f i nance i ns t i t ut i ons , i nves t men
t banks , s t ock exchange s , cor por at e br oker age hous es , l eas i ng compani es ,
di s count hous es , mi cr o- f i nanceinstitutions and Islamic banks. They offer
a whole range of products and services both on the assets and liabilities side.
Financial deepening has intensified during the l a s t s e v e r a l y e a r s b u t t h e
c o mme r c i a l b a n k s a r e b y f a r t h e p r e d o mi n a n t p l a y e r s accounting for 90
percent of the total financial assets of the system
Among the commercial banks, 12 foreign and 20 domestic banks together hold 80 Percent of
the banking system assets - a feat that is unparalleled among developing
countries. Foreign banks enjoy the same facilities and same access as the
domestic banks and there is no preferential treatment for
domestic institutions. Unlike many countries, foreign banks can have 100 percent
ownership, can open their branches or establish local subsidiary with full
ownership. Foreign companies are also provided l e v e l p l a y i n g f i e l d s a s t h e y
c a n r a i s e f i n a n c e s o f a l l t y p e s a n d t e n u r e s f r o m t h e domestic banking
system
). Financial markets provide facilities for buying and selling of
financial claims and services. The participants on the demand and supply sides of these
markets are financial institutions, agents, brokers, dealers, borrowers, lenders, savers, and
others who are inter-linked by the laws, contracts, covenants, and communication
networks of the land. Financial markets are sometimes classified as primary (direct) and
secondary (indirect) markets. The primary markets deal in new financial claims or new
securities and, therefore, they are also known as New Issue Markets. On the other hand,
secondary markets deal in securities already issued or existing or outstanding. The
primary markets mobilize savings and they supply fresh or additional capital to business
units. The secondary markets do not contribute directly to the supply of additional
capital; they do so indirectly by rendering securities issued on the primary markets liquid.
Stock markets have both the primary and secondary market segments.