Banking sector reforms in Pakistan: economies of scale and scope, and cost complementarities

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This digital document is a journal article from Journal of Asian Economics, published by Elsevier in 2004. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
Although banking sector development is important at the early stage of economic growth, general liberalization presuming a homogeneous bank role may not necessarily promote growth. The objective of this paper is to examine how to scale-up Pakistani banking efficiency through operational specialization and diversification, and size expansion. The estimated cost structure indicates that state-owned commercial banks are large enough, while development financial institutions and private banks can expect to obtain cost-saving advantages by expanding their operations. Since scope economies are significant, portfolio diversification generally increases bank profits. In addition, privatized banks are the most efficient, followed by foreign and private banks. Public banks are the least efficient.

Banking sector reforms in Pakistan: economies of scale and scope, and cost complementarities