Shadow Banks in Pakistan: The Risky Underbelly of Finance

Abstract

The rise of shadow banking in Pakistan has raised concerns about the stability and oversight of the financial system. This study explored the extent and potential risks posed by shadow banking activities in Pakistan. Data was collected through surveys and interviews with regulators, bankers, and industry experts. Regression analysis examined the relationship between shadow banking indicators and financial stability measures. The findings revealed a significant presence of shadow banking entities operating with minimal regulation. Shadow banking activities were associated with higher financial instability. The study recommends strengthening regulatory frameworks, enhancing transparency, and improving risk management practices to mitigate potential threats from the shadow banking sector.

Keywords: Shadow Banking, Financial Stability, Regulation, Risk Management