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Document Type

Conference Paper

Publication Date

4-28-2004

Conference Name

World Bank PREM Conference on Growth Strategies

Conference Location

Washington D.C.

Conference Dates

April 28, 2004

Series

Faculty Research - Book Chapters and Conference Papers

First Page

1

Last Page

4

Keywords

Financial sector, Economic growth, Macroeconomic reforms, Reforms, Pakistan

Abstract / Description

The linkage between financial sector and economic growth is well understood but its impact on poverty reduction is still nebulous. There is no automaticity between growth and poverty reduction and this link needs to be nurtured. The notion is to work on this linkage through income distribution component of poverty reduction. It is also obvious that the days of State-owned Development Finance Institutions (DFIs), directed credit and mandatory targets for priority sectors, subsidized interest rates, public sector owned specialized financial institutions are over. The channeling of credit to the poor and middle-income classes has to be achieved through market-based financial system. The recent experience of Pakistan demonstrates that only when a combination of macroeconomic reforms, financial sector reforms, and carefully designed enabling regulatory framework are deployed in a strategic manner bank credit can be channeled to this desired target group without distorting marked based competition and incentive structure.

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