Money and Power
The three major reasons for the deterioration of the financial institutions in Pakistan are (1) nationalisation (2) dependence of both the government and the private sector for liquidity exclusively on the banking system and (3) pre-emption of substantial part of the credit by the government. A myriad number of smaller inter-locking factors have contributed to the decline of the credibility of financial institutions in Pakistan but most can be traced back to these aforementioned over-riding reasons.
Two major concerns led to the nationalisation of the banks in the early 70s by the first PPP regime. Of primary concern was the fact that control of finances of the country interfacing with that of assets were in the hands of a very small minority. The other reason was that the priority sectors were neglected inasmuch social and even economic development were not supported by credit allocation viz, agriculture, small industries corporation, transportation, construction, etc. Money was concentrated in the urban areas at a severe cost to the rural areas. A great bulk of the credit was going to industry and trade which claimed about 67% of the credit given to the private sector with only the balance 33% going to the rest of the private sector economy.
