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Monday, 22 October 2012

What is electronic banking and discuss the scope and advantages of Electronic banking






Electronic Banking :-
In simple words we can say that the delivery of banking services to the customers by using the electronic communication like internet is called electronic banking. Electronic banking is not only the ATM facility but it provides all other banking services like payments, purchase and sale without visiting physically to the banks.


Scope Of Electronic Banking :-
To day the customer demands the services of banks 24 hours where he lives even he is in the airplane.

Now in this modern age the entire banking structure has been changed due to widespread internet technology. Now all the business like commerce, trade, import, export, purchase and sale of goods is relying upon electronic banking. By using the advance electronic technology the banking services are fast and economical.

There is a saving time an saving of money in the use of E.banking. If any country wants to work in the world market, it will have to improve the banking services at international level because old traditional banking is not acceptable in the changing global economy.

The online banking facility has been provided by the large number of commercial banks. On other hand credit card facility is also available in the various commercial banks. Now every bank wants to attract the customers and for this purpose the offers the latest facilities so i seems that no any bank will survive in the market if he fails to provide up date facilities.


ADVANTAGES OF ELECTRONIC BANKING :-
Now it is also called on line or home banking electronic banking was stared with the use of proprietary software. Following are the important advantages of electronic banking :

1. Paper Work Reduced :-
The traditional procedure of banking is manual and paper based. Electronic banking is gradually replacing the paper transactions in the banks which has reduced the paper work.

2. Easy Transactions :-
Electronic banking has reduced the problems of the customers like writing cheques, filing taxes, and transforming of cash. Now in ATM facility there is no need of cheque book.

3. Security :-
Electronic banking provides the safe system of payment. Now transactions are made in the accounts through internet.

4. Saving Of Time :-
Electronic banking has saved the time and money of the customers and also the bank. Now burden of work on bank employees has been also reduced. were hired at higher wages, so operating cost was very high. Now by using electronic banking the number of employees has been reduced.

5.Reduction In Cost :-
In case of manual banking, large number of employees were hired at higher wages, so operating cost was very high. Now by using electronic banking the number of employees has been reduced.

6. Market Expanded :-
Due to electronic banking, national international market of various goods and services has been expanded. Now we can purchases and make payment in any place in the world.

7. Increase In Customers :-
As the banking industry is expanding due the modern facilities, it is attracting more and more customers. So number of customers are increasing day by day.

8. Branches Reduced :-

Now there is no need to open the branches on every place in the city because due to electronic banking facilities, there is no rush of customers in the banks. Because there is no need to visit the bank physically. So heavy cost of opening the new branches has been reduced and facilities are provided at low cost.

9. Checking Of Account :-
Every customer can check his balance of account sitting at home and makes the payments without traveling. It saves his time and expenses.

10. Utility Bills Payment :-
Bills, like telephone, gas, electricity and water can be easily paid to the concerned departments without going to the bank physically. Even he is sitting in any other country, he can make the payment.

11. Transferring Of Money :-
There is no need of writing the deposit slip cheques and drafts. By using the electronic banking money can be transferred easily.

12. Credit Cards :-

It is also very important facility for the customers that he can purchase the goods and ca make the payment by using the credit cards.

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Wednesday, 17 October 2012

Define business finance or describe the sources of short term and long term finance or various types of business finance






BUSINESS FINANCE :-
According to George Terry "Finance consists of providing and utilizing the money, capital rights, credit and funds of any kind which are employed in the operation of an enterprise."

So business finance means investing borrowing and spending of money with proper manner so for the operation of a business.

Importance Of Business Finance :-
For any successful business finance has a primary importance. Finance is life blood for business. No business can run smoothly with out finance. There is a need of sufficient to achieve the desired results from the business activities.

Sources Of Business Finance :-
There are two sources of business funds :

1. Creditors.    2. Owners.

Creditors provide the funds temporarily while owner provide the funds permanently.
Following are the important sources of business finance :

A. SOURCES OF FINANCE :
1. Owners Financing or Equity Finance in Financing :-
If a firm needs the financial needs of a business from the funds supplied by the owners, it is called equity financing. When owner uses his own capital for current and fixed assets then he saves himself from the following problem.

a. He will not pay interest to any body because he has used his own capital.

b. He will not give the profit to any lender.

c. He will improve the quality of facing slumps.

d. For getting the loan he will not face any problem.

e. He will be able to control the business with full concentration.

2. Non Company Equity Financing :-
If sometime a proprietor is not able to meet his financial needs from his personal capital and he is also not ready to borrow then he can increase the equity capital by admitting any trust worthy sound party in his business.

3. Company Equity Financing :-
By selling the ordinary shares, a company may obtain the equity capital. Common stocks represent the ownership. The common stock holders have a right to receive profit declared by the company. They can also give vote and sell the shares in the market.

4. Financing Through Reserve Profit Ploughing Back Profit :-
To increase the owned capital of the firm a part of the profit is retained in the business. From this capital it can meet the financial needs easily. A firm can also use this part of profit for the extension of business or to face the depression.

5. Debt Financing :-
When we meet the financing needs by borrowing it is called debt financing. It is obtained if the owned capital of a firm is not sufficient to meet the business needs. Sometimes loan is obtained to save the business from dissolution and some times to meet the urgent expenses. Loan is obtained from creditors for short run for long run and for medium term.


TYPES OF BUSINESS FINANCE :-
Following are the important types of business finance :
1.    Short Term Finance.
2.    Medium Term Finance.
3.    Long Term Finance.

SHORT TERM FINANCE :-
This type of source is obtained for a period of one year or less than one year. It is required for the temporary needs of the business.

 
MEDIUM TERM FINANCE :-
The duration range of the intermediate term finance is from one year to ten years. Short term and medium term loan is provided by the following agencies.

1.    Commercial Banks :-
The commercial banks receive the savings of the people and lend it for short term to businessman. The bank advances the loan in the shape of cash or overdraft.

2.    Federal Government Agencies :-

Many agencies of the central bank provide loans to private business. Generally central bank authorizes them to advance loan in the emergency period.

3.    Re discounting Facility :-
Central bank provides re-discounting facilities on 1st Class bills. The cash can be raised when bank loan are not available on simple terms.

4.    Foreign Exchange :-
These banks advance loans to the large scale foreign business according to nationality.

5.    Friends and Relatives :-
A number of persons borrowing from friends and relatives for a short period. But this source is very limited.

6.    Private Money Lender :-
Private money landers like landlords and Sahukar also lends the money both their rate of interest is very high.

7.    Finance Companies :-
These are specialized finance companies and they also lend the money for short and medium terms.

8.    Cooperative Societies :-
These provide loans to rural areas for business on the security of land. These provide short term and medium term loans.

9.    Consumption Credit Agency :-
These companies provide the loans for consumption goods. Small businessman borrows the money for short and medium term from these agencies.

10.    Finance Facility By Agent :-

Sometimes managing agent also provide short term finance to the concerned business.

11.    Commercial Paper House :-
These financial agencies are from to buy the promissory note of the small business and then resale them to the investors in the open market.

12.    Partial Payment Method :-
Some producers sell their product on cash basis and others on installment basis. Some portion of the price is paid at the time of purchase and the balance is paid on installment basis. This method is also useful in providing short term finance.

 
LONG TERM FINANCE :-
This type of finance is required for a period more than ten years. The long term finance is use for the construction of building and machinery. Long term loan is provided by the following sources :

1.    Financial Institutions :-
There are various financial institutions which provide long term finance to the industry and business.

2.    Saving Of The Company :-
A long term finance is also act by the savings of the company. A company does not distribute its all profit among the share holders. They transfer some portion of the profit to reserve funds every year. So a company uses this saving for investment.

3.    Proprietors Own Resources :-

The proprietors may meet the long term financial requirement by the following sources :

i.    Joint stock company can issue the shares or debentures.

ii.    Sale traders and partner can dispose of their private assets. They can also use their profit.


4.    New Partners :-
By inviting new partners in a firm the volume of capital can be increased. The new comers will contribute their share of capital in business but they will not participate affairs of a business.

5.    Underwriters :-
In obtaining the long terms finance for a public limited company underwriters services can not be ignored. They undertake to dispose of the securities of the companies and receive commission for their services.

6.    Bonds :-
This is an important source of long term finance under this system large size business issue secured and unsecured bonds. These bonds may be disposed of directly or through agent.

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Wednesday, 3 October 2012

Explain the process of interest free banking of Pakistan or Write a note on Islamisation banking In Pakistan






Pakistan is an ideological country and since 1947 it was the burning desire of the Pakistanis that they should lead their lives according to Quran and Sunnah. In Islam interest is prohibited. Islamic economic system is an interest-less system. So the present Govt. accepted the challenge and has taken steps to Islamize the economy. Following are main steps :

1. Introduction Of Islamic Banking :-
The process of Islamisation of our banking and financial system was introduced in july, 1979. The Govt. of Pakistan decided that only Islamic economic system can ensure the better standard of life to the public.

2. Amendments In Banking Law :-
To facilitate the introduction of interest free banking necessary changes were made in the banking laws in June, 1980. Different companies were allowed to start the business on the basis of interest free system.

3. Profit And Loss Sharing Deposits :-
All the commercial banks and bank of Uman starting accepting deposits of profit and loss sharing on 1st Jan 1981. At the same time the banks were asked to invest the PLS deposits in specified interest-less business. The field of business was gradually extended during the year 1981-1993.

4. Modaraba Ordinance 1980 :-
A Modaraba means the business in which some persons participate with their money and the managers with their skill and knowledge. The profits are distributed among both the parties. But the condition for the business is that it should be according the principles of Shariah. In order to encourage the business on the basis of profit participation a law was introduced which is called Modaraba ordinance 1980. The Govt. has also appointed a Registration of modaraba companies.

5. Musharika :-
It is an organization in which all partners contribute the capital. Profit is distributed among the partners according their agreement. Banks have been permitted for investment on the basis of sharing in the profit and loss.

6. Equity Participation :-
Banks are also allowed to purchase the shares of the listed joint stock companies.

7. Participation Term Certificate (PTC) :-
Participation term certificate is an instrument of finance issued by the company for meeting to its medium and long term capital needs. A company is authorized under the companies ordinance to issue PTC according the Govt. instructions.

8. Mark Up Method :-
Mark up means the purchase of goods by banks and their sale to the customers if the payment is on deferred basis. The financier arranges for the purchase of goods requested by the customer and sells these to him the basis of cost plus agreed profit margin (mark up). The payment can be made by customer over a specific period in lump sum or in installments.

9. Mark Down :-
It is a purchase of moveable or immoveable property by the banks from their customers with buy back agreement or otherwise.

10. Leasing :-
It is a long term financing in which the financier retains the ownership of the as set over a specified period of time on the payment  fixed amount. When the specified period is over then ownership of asset goes to lease.

11. Hire Purchase :-
On the basis of hire purchase banks are allowed to provide finance for the purchase of machinery to their clients in trade and industry. In a hire purchase deal the payment includes a portion of acquisition of ownership right and an element of rent.

12. Development Charges :-
The banks are also allowed to finance for the development of property.

13. Interest Free Loans To Farmers :-
Since July, the farmers, tenants and fisherman are receiving loans from the commercial bank. Cooperative banks and from the agriculture bank. The interest free loan has enabled the small farmers to use the modern inputs. The yield per acre is increasing due to this reason.

14. Qarze Hasna :-
The nationalized commercial banks provide interest free Qarze hasna to the deserving people in the country. These loans are payble as the borrower is able to repay. For example the commercial banks and banking council is providing loans to those students who want to get the higher and professional education inside and out side the country.

15. Investment Corporation (ICP) :-
The investment corporation has eliminated interest from the twelve mutual funds from July 1979. The ICP scheme was converted into profit and loss sharing on 1st Oct. 1980.

16. National Investment Trust (NIT) :-
The NIT was converted into interest free organization from July 1, 1979 to increase the process of Islamisation. After every three month NIT announces the rate of profit on every unit.

17. Small Business Finance Corporation (SBFC) :-
This corporation was also eliminated interest from its operation. The corporation had also provided financial assistance on Hire purchase system.

18. House Building Finance Corporation (HBFC) :-
The interest has been also eliminated from the operation of house building finance corporation from December, 1978.

19. Collection Of Zakat :-
Zakat is considered the backbone of Islamic economic system. So Zakat is also deducted by the commercial banks from the saving accounts of the public.

No doubt the Govt. of Pakistan is making sincere efforts to eliminate interest from economy. But still some doubt there in our minds such as the
1. National Saving Scheme which are still on interest basis.

2. The problem of international transactions which is on interest basis.

3. The loan against buy back agreement by the banks.

Any how, we can say that if our bankers, businessmen and governing  body cooperate and behave honestly, the Islamic banking system will succeed.

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Discuss in brief the merits and demerits of equity and debt financing or What are two main sources of raising fund for a corporate enterprise






EQUITY FINANCIER OR OWNER'S FUNDS :-
Equity means the ownership to the resources of the business. It is an important source of obtaining funds. The real owners of the business and share holders of the corporation provide funds to the business from their own sources.

Following are the important sources of equity funds :
1. Funds provided by the owners.

2. Additional contribution made by the owners.

3. Earned profits reinvested by the business.

4. Contribution by venture capitalists.

5. Issue of stocks to general investing public.

 
ADVANTAGES OF EQUITY FINANCING :-
Following are the merits and demerits of equity fund :

1. Sound Base :-
Any business which is financed by the owners fund possesses a sound position.

2. Personal Interest :-
If fund is provided by the owners then they will work with full devotion. The business will flourish and rate of profit will be high.

3. No Interest :-
Interest charges will not be paid by the business concerns on owners fund.

4. Liquidation Of Business :-
The assets of the business will remain with owners if business is liquidated.

5. Return Of Funds :-
During the course of business owners have no fear for the rate repayment of the capital. The owners use their fund for a long time.

6. No Financial Problems :-
In case of equity financing the business concern has a freedom from the financial worries of borrowing.

7. Stable Position :-
In this case there is no burden of fixed interest charges. So business concern can face the crises of recession.

8. Borrowing Ability :-
A business which is financed by the owners fund will be very stable and it has ability to obtain the borrowed capital.


DISADVANTAGES OF EQUITY FINANCING :-

1.Payment Of Income Tax :-
In case of equity financing a firm pays more income tax as compared to credit financing. There is no deduction of interest cost.

2. Idle Funds :-
Some times funds obtained from owners funds remain UN-utilized which may cause more losses.

3. Inability To Make Payments :-
Increase of crises or slump a firm have sufficient to pay day to day expenditure which are essential to run the business.

4. Costly Source :-
Sometimes it has been also observed that equity financing is costly as compared to the credit financing.


DEBT FINANCING :-
When a firm obtains funds for business through borrowing it is called debt financing or credit financing. Today most of the business concerns are not able to finance the business by their own funds. They enter in to agreement with lenders or banks and obtain capital on interest for investment. This practice of borrowing is called debt financing.


ADVANTAGES OF DEBT FINANCING :-

1. Economies Of Large Scale :-
By borrowing the capital business can be expended on large scale. Due to this various types of economies can be availed by the firm.

2. Low Income Tax :-
When income tax is calculated, interest is deductible expense for income tax. So credit offers tax advantages.

3. Short Term Loans :-
Short term loan can be taken by the business concerns from the banks and other sources to meet the urgent expenses.

4. Earning Of Profit :-
The rate of interest is usually less as compared to the rate of return received from the invested capital. So in this way it earns the profit.

5. Control Of Business :-
The entire control of the business remains in hand of the borrowers. Creditors have no role in the business management.

6. Credit Is Flexible :-
The credit may be obtained when needed and it may be returned when it is no more required. There is flexibility in creditors funds nature.


DISADVANTAGES OF DEBT FINANCING :-
The use of creditors fund has the following disadvantages :

1. Interest Payment :-
Interest is regularly paid by the business whether firm is earning profit of loss.

2. Payment Of Credit :-
The principal amount will be paid at the due date without any regard to the financial condition of the firm.

3. Rate Of Interest In Crises :-
During the depression period rate of interest remains same but the rate of return on capital falls and business suffers a loss.

4. Maturity Of Loans :-
At the time of maturity of loans if sufficient funds are not available to meet the loans, the business can be closed.

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Comprehensive note on Musharika and Modaraba






MUSHARIKA :-
The bank and customer join the temporary partnership and carry on the business. The bank and customer contribute the capital according the agreed ratio. Profit is also distributed according the agreed ratio. It is an important mode of Islamic financing. Following are the important features of Musharika.

1. Business Operation :-
All the business is operated by the customer. He is responsible for organizing the business. The bank only evaluates and monitors the business. The customer invests his capital and also uses his skill and knowledge.

2. Case Of Profit :-
In case of profit, bank shares the profit according the agreed ratio.

3. Case Of Loss :-
In case of loss in Musharika financing the bank will share the loss according to the ratio of fund invested in the business. The banks share of fund will be the actual amount financed by it.

4. Hire Purchase :-

Basically Musharika investment was introduced to cover the working capital of the business. Now banks are allowed to invest the money for the fixed capital.

5. Safety Of Capital :-

In Musharika financing bank obtains security from the party for the safety of his capital.

6. Insurance :-
The security which is obtained by the bank, it is also insured. The expenses of insurance are paid by the party.

7. Selection Of Party :-
Before financing the loan bank selects the parties keeping in view their previous reputation and profit record for 2 to 3 years. It is also checked that non of the director has been a defaulter of the bank.Under Musharika system the finance is approved by the bank head office.


MODARABA :-
Islamic economic system in interest less. People do the business on profit and loss sharing. In Modaraba business some persons participate with their money while other with their, efforts and skill. If profit earned it is distributed among the entrepreneur and financier according the agreed ratio.
      In case of loss financier shares the loss according the capital invested in the business.

Note :- If losses occur due to negligence of manager or breach of agreement then he will bear the losses. A modaraba (Manager) is a legal person. Modaraba companies ordinance was issued in 1980.

Registration :-
Modaraba company can be registered under the ordinance and it should fulfill the conditions mentioned in the ordinance. There are two kinds of modaraba company, one is multipurpose and other is specific purpose.


CONDITIONS FOR MODARABA COMPANIES :-
Following are the important conditions for Modaraba companies :

1. According To Islamic Shariah :-
The first and important condition for the Modaraba company is that its business should be operated according the law of shariah. It should be Halal.

2. Permission From Religious Board :-
One religious board is established which gives clearance that business is Halal. There are three members of the board. One is high court judge and two are religious scholars.

3. Prohibition Of Loan :-
Any director or the officer or their relatives can not take the loan from the Modaraba company. Even they can not get the loan against the security of the company.

4. Mobilization Of Resource :-
Modarba company generate its resources by selling its shares or Musharika certificates. Some Modaraba have the "Income Note" which are another mode of finance.

5. Modaraba Companies In Pakistan :-
There are large number of Modaraba and leasing companies which are working in Pakistan. But the turn.

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What is the difference between musharika and modaraba







MODARABA :-
Modaraba is a business in which one person participates with his money and another person with his knowledge and skill. If there is a profit in business, it will be distributed according the agreed ratio on other hand if there is a loss it will become by the financier.

The person who participate in the business with skill is called Modaraba.


FEATURES OF MODARABA :-

1. It is an agreement, in which one party provides managerial skill and other party provides capital funds to carry on the business.

2. Profit is shared according the agreed ratio.

3. It may be "Multiple Purpose"  for special purpose.

4. This business must be governed by the "Modaraba companies Modaraba rules, 1981.

5. According to the modaraba rules at least 10% shares are compulsory for the party who provides managerial skill.

6. A company which is registered as a modaraba company can float a modaraba.

7. For the floating of modaraba. Company must obtain the permission from the registrar and controller.

8. A clearance certificate is also obtained from the Religious board that business is not against the Islamic Laws.

9. Each modaraba company has to appoint the charted accountant, as auditor who will certify the accounts and objectives of modaraba.


MUSHARIKA :-
It means an arrangement of business, in which all the parties contribute the funds. In this business profit is shared in pre agreed proportion by the parties according to their ratio of capital contributed.
       Banks have been permitted for investment on the basis of sharing in the profit and loss. So musharika is a temporary agreement between bank and a party for providing working capital with the conditions that the profit will be shared at the agreed ratio but loss will be shared in strict proportion of the actual fund invested. All the limited companies are eligible to participate in musharika. The entire management of the musharika business shall remain in the hands of the borrowing party. The bank will evaluate the performance of the business only.


FEATURES OF THE MUSHARIKA :-


1. Relationship :-
In case of Musharika the relationship between banks and other party is that of debtor and creditor according the ordinance 1980.

2. Profit And Loss Determination :-
In Musharika business profit is determined after taking in to consideration the various other factors besides the capital like political and economic conditions. Bank can not claim the profit on equal footing.

3. Bank Investment :-
In case of Musharika bank invests the capital. It does not lend the money to the other party.

4. Working Capital :-
In this case investment shall be used only for the financing requirements of working capital.

5. Security :-
To ensure safety of the capital the bank shall in its own right may obtain adequate security from the party. The securities shall be kept fully insured at the party cost.

6. Power Of Sanction :-
In case of first time the power for approving working capital finance under Musharika system shall rest with the head office only.

7. Case Of Loss :-
In case of loss bank also shares with other partner in proportion to their respective share in capital of the venture.

8. Payment Of Profit :-
An estimate of anticipated profit or projected rate of profit is provided by the other party to the bank when it enters into Musharika. It pays the share of profit to the bank made during a quarter in agreed proportion.

9. Right Of Bank :-

If customer fails to provide the accounts to the bank than bank has a right to debit the customer, his share of profit according the anticipated rate of profit.

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Write a note on 1. Stock Exchange 2. IDBP 3. PICIC 4. NIT 5. ICP 6. EPF 7. NDFC 8. BEL 9. Insurance companies 10. Combined companies 11. HBFS 12. SBFC






In Pakistan capital market mainly consists upon the following institution :

1. STOCK EXCHANGE :-
It is a market for existing securities which are issued by the public authorities. Stock exchange provides a place to the buyers and sellers of the shares and securities. Stock exchange indicates about the good or bad health of the economy. If the share prices are rising it means country is running on the path of development and prosperity. If the share prices are falling, it is sign of downfall of the economy. At present there are two stock exchanges in Pakistan. The Karachi stock exchange was registered in 1949 and Lahore stock exchange in 1971.

2. PAKISTAN INDUSTRIAL CREDIT AND INVESTMENT CORPORATION (PICIC) :-
The Pak industrial credit and investment corporation was established in 1957 with the help of Govt. of Pakistan and world bank. The private domestic investors hold 65% shares and the remain 35% has been taken by foreign investors from Japan, U.K, West Germany and France. A board consists upon the 20 members. Five members are foreign share holders. The Pakistan industrial credit and investment corporation provides the financial assistance to the new industries. Before advancing loan it examines the profitability and its importance to the economy. The objective of the Picic is to support the private industrial sector, in form of local and foreign currencies. It also provides technical skill to the industrialists. Corporation also arranges direct loans from abroad.

3. NATIONAL DEVELOPMENT FINANCE CORPORATION (NDFC) :-
Its main objective is to promote industrial expansion and economic growth in the country. It provides technical and financial assistance to the new and other projects. Railway, Airlines, Shipping, Ports, Steel Mills and Textile is financed by the NDFC.
Any one firm or individual can purchase the NDFC certificates. It provides large term and small term loans. NDFC offers higher rate schemes in the country with the maximum safety and security. NDFCs financial resources comprise of capital and reserves deposits in local and foreign currencies. World bank, Asian development bank and Islamic development bank also provide finance to this institution. The board of directors compromises of six directors including chairman, all are appointed by the Federal Government.

4. NATIONAL INVESTMENT TRUST (NIT) :-
The NIT was set up in 1963.. It is a joint stock company with paid up capital of 1.2 million. The NIT was converted into interest free organization in 1979. It was established to mobilize the savings to meet the growing needs in the country. It announces the rate of profit on the unit after every quarter. Now its branches are availabale in the big cities of the country. The national bank of Pakistan acts as a trustee of NIT. It also undertakes sales and purchase of units along with other commercial banks. Zakat is charged at the rate of 2.5% on the purchasing value of the NIT units.

5. INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN (IDBP) :-
It is another important source which supply the funds for industrial development. It provides medium term and long term credit facilities. The loan are granted for the establishment of new industrial units and for the replacement needs of old units. The major objective of this bank is the spread the benefits of industrialization in all the classes of the people. It issues the loans on behalf of the Govt. and provides finance in the form of equity. It also encourages the establishment of industries in the less developed areas of the country. It pays due regard to the export oriented industries and those industries which are based on domestic raw materials.

6. INVESTMENT CORPORATION OF PAKISTAN (ICP) :-
It was set up in 1966. Its major objective was to develop the capital market in the country. It has to provided the sound base for investment in Pakistan. The authorized capital of the ICP is 200 million Rs. It has opened the branches in important cities to increase the share holders in the country. This corporation has also started the scheme of profit and loss sharing in 1980. The ICP mutual funds are operated on interest free return. It mobilizes the savings of public inside and outside the country.The fund amounting to Rs. 280 million has been fully subscribed. One board of directors supervises it which has eleven members including chairman. These are appointed by the federal Government.

7. EQUITY PARTICIPATION FUND (EPF) :-
It was established in 1970. Its major objective was to improve the growth of small and medium size of the private sector. It had to give priority to the less developed areas of the East and West Pakistan. After the Dacaa fall in 1973 it was reorganized. The authorized capital of the Fund is Rs. 200 million, which is contributed by the federal and provincial Govt. State bank and institutional investors. Any how its main objective is to provide equity support to the less developed areas to improve their economic condition.

8. BANKERS EQUITY LIMITED :-
It has started functioning in 1980. Its object is to improve the private sector investment and capital market. It also works on the basis of interest free loans upto 1984 it approved financial aid for 25 projects.

9. INSURANCE COMPANIES :-
In Pakistan there are three insurance companies which are playing very effective role for the capital market. State life insurance corporation was set up in 1972 and its position is the strongest then the other while Pakistan insurance corporation and national insurance corporation services also can not be ignored in this regard.

10. COMBINED COMPANIES :-
Pak Saudia company, Pak Kuwait and Pak Japan companies are also playing important role to improve the industrial and agricultural sector in the country. These are providing finance to the different sectors and improving the capital market in the country.

11. HOUSE BUILDING FINANCE CORPORATION (HBFC) :-
This institution was established in 1952 to advance the loans for the purchase of land and construction of houses. In December, 1978 the interest was eliminate from the operation of house building finance corporation. There is a board of eight directors which manages the affairs of the corporation. The house builder can get finance from the corporation once in life upto Rs. 1 lakh. Maximum repayment period is 15 years. No doubt this corporation is very useful in creating the new assets in the country. Besides the share capital of Rs. 12.5 million it borrows from state bank, debentures and Govt.

12. SMALL BUSINESS FINANCE CORPORATION (SBFC) :-

It was set up 1972. Its main aim is to provide financial aid to the small businessman, to increase the rate of production and employment in the country. Those people who have some technical know how but they are financially poor, they can get the finance from this corporation. Its head office is at Islamabad. Cottage and small scale industry is financed by this corporation. The corporation has also Islamized its corporation in 1980 by eliminating the interest.

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