The World Bank (WB) has asked the government to liberalise the insurance industry through reforms in line with the banking sector, official sources told Business Recorder.
"Insurance penetration is very low, relative to other countries, at Pakistan''s income level which requires further consolidation and liberalisation of the industry," sources quoted the bank''s mission on Implementation Completion Report (ICR) as saying.
"The WB is of the view that the county''s banking sector has gone through beneficial structural reforms, but the rest of the financial sector has not been subjected to reform process to the same extent."
The mission also met with the stakeholders in the private sectors including senior bankers in private and foreign banks, besides the Islamabad-based representatives of Asian Development Bank (ADB), International Monetary Fund (IMF) and the World Bank to discuss financial sector reforms.
The ICR mission said that there was general consensus that privatisation of the banking sector had been a success and they were happy the way privatisation had improved the performance of the banks after sell-off. As the financial practices in Pakistan have became more complex, there is a consensus that the human capital is not available to meet the requirements of financial sector.
They said that privatisation of public sector banks had enhanced the need for effective top management, and added that skill should be improved, especially in assessing the risk of consumers.
"There is also a general recognition of the need to develop the capital market and it is felt that current debt market is not very deep and effective. The practitioners expressed the need to develop this market further, especially the corporate bond and commercial paper market," sources quoted the mission as saying in the report.
Furthermore, it was felt that there was limited rationale for having a state-owned commercial bank and that one should work towards removing unfair advantage in terms of any tied-in business from the government. The stakeholders were also of the view that Pakistan was now in great need of an effective export credit agency.
Giving the background of loan, the report said that the proceeds/credit for the Banking Sector Development Policy Credit (BSDPC) were disbursed in record short time. The legal agreements were signed in January 13,2005 and the project was declared effective from January 18,2005. The bank obtained withdrawal applications for SDR 65 million and $200 under the credit and loan respectively on January 18 and funds were disbursed on January 20. The State Bank of Pakistan (SBP) received the funds on January 24 and credited the money to the consolidated account of the GoP the same day.