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lamic modes of financing. In 2002, the first Islamic bank was established under the name of Meezan bank. Since then, the number of Islamic banks has been opened. Various traditional banks are now opening Islamic specialized branches. At the end of 2009, total assets of the Islamic banking have reached to 366.3 billions and the deposits in Islamic banks have reached to 282.6 billions [1] . At the end of calendar year 2009, there are 9522 total branches of banks in Pakistan which shows an increase of 376 branches in banking sector from the 3rd quarter of 2009. Moreover, the asset base of banking sector has shown a growth of 7 percent over the last quarter.

(Yasmin, Jehan, & Chaudhary, 2006) explains that after independence in 1947, Pakistan avoided trade openness because of weak industrial structure. In 1960’s, industrial base was laid and manufacturing industry expanded widely in Pakistan. However, industrial expansion face setback in 1970’s due to nationalization of industries. In 1980’s, IMF and World Bank provided facilities to the Pakistan in order to initiate the financial restructuring in country. A loan of $150 million and $200 Million was provided for this purpose under “Financial sector adjustment loan” in 1989 and 1997 respectively. Another project named as financial sector deepening and Intermediation project was initiated in 1995. The estimated worth of that project was $216 million. (Hanif, 2002)

Despite of the remarkable performance since last two decades, the banking sector of Pakistan is less developed and remains small in relation to the economy, when it is compared to the other banking sectors of the world. This shows that a number of financial and banking needs are still ignored and that much of the economic potential of Pakistan is not achieved yet.

Highlights of banking sector of Pakistan

Following is the highlight of banking sector of Pakistan from 2005 to 2009.

Source: State Bank of Pakistan

LITERATURE REVIEW

(Christopoulos & Tsionas, 2004) states there is no one opinion of economist on the issue of financial development and growth of economy. (Pagano, 1993) describes that savings are mobilized towards the productive investment due to financial deepening which helps in improving corporate governance. (Khan & Qayyum, 2007) says there are three major channels through which financial development can affect economic growth (i) marginal productivity of capital can be increased (ii) savings are directed towards the investment (iii) level of private saving rate can be increased.

The relationship of economic growth and financial development was first discussed by (Goldsmith, 1969), (McKinnon, 1973) and (Shaw, 1973). Their study shows that there is a positive relationship between financial development and the level of output i.e. when the financial market will increase the credit level, the investment will increase thus, showing that real income and real interest rate is a positive function of financial development. (Yu & Gan, 2010) study shows that due to positive real interest rate, the mobilization of savings of banks increases and it also increases 本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。