Zahra Fatima 13226

Non Banking Financial

Institutions

Definition
A non bank financial institution
(NBFI) is a financial institution that
does not have a full banking license or
is not supervised by a national or
international
banking
regulatory
agency.
Examples
Insurance firms
Currency exchanges
Microloan organizations.

Major Differences between

NBFI and Banks
A NBFC cannot accept demand deposits
NBFCs cannot issue cheques to its customers as they
are not a part of the transactions system.
Deposit insurance facilities are also not available for
NBFC depositors unlike in case of banks.

Advantages
Provide

loan and credit facilities

Support investment in
properties
Provide retirement planning
Wealth Management such as
managing of portfolios of stocks
and shares.

NBFC regulatory setup

by SECP

Funding Options
NBFIs can raise funds through the
following options as stated by SECP:
Borrowing
Issuance of

Ordinary and Preference

Shares
Loans from Sponsors

Present Status 2003-2012

Analysis

Apart from mutual funds industry which

showed a CAGR of 26% rest of the NBFI
players had dismal performance. Leasing
and investment banking are continually
shrinking whereas housing finance has
ceased to exist. Pension funds industry is at
nascent stage while sectors like REITs &
Private Equity despite having potential
have remained untapped. Modaraba, an
Islamic mode of business, despite having
incomparable adv of a tax holiday, has not
been able to attract entrepreneurs.

Recommendation by
SECP

Proposal by SBP
To

regulate the 23 non-bank

financial companies (NBFCs), (12
leasing and three housing financing
companies and eight investment
banks) besides dozens of bank
subsidiaries. This will leave 98 NBFCs
mostly modaraba and leasing
companies that will remain under
SECP control.

SECP or SBP?
It

would be rather prudent enough if SBP focused its

attention to its basic function of looking toward
economic stability of the country i.e. monetary
policy, exchange rate etc.
SECP should be given a chance to implement the
new regulatory framework as it is based on a study
of five international jurisdictions namely India, USA ,
Japan, Singapore and Malaysia as a strong banking
and financial sector is very crucial for facilitating
higher economic growth and NBFCs have a definite
and very important role in the financial sector,
particularly in a developing economy like ours.

References
http://jang.com.pk/thenews/aug2008

-w
http://forum.secp.gov.pk/NBF-Refor

mCommitteeReport.pdf
http://secp.gov.pk/CS/ChairmanSpee

ches/PDF/211205_IBAP_lunch_Lhr.pdf