Impact of Bank Loans in Transforming Standards Of

Living in Pakistan

RESEARCH PROPOSAL

Impact of Bank Loans in

Transforming Standards Of Living in
Pakistan
(Research Conducted in Karachi Region)

BY

Ramiz Uddin Qazi (MAJU KARACHI) 0

 Impact of Bank Loans in Transforming Standards Of
Living in Pakistan

RAMIZ UDDIN QAZI

FA13-ES-0008
MS-FINANCE (WEEKEND PROGRAM)
MUHAMMAD ALI JINNAH UNIVERSITY KARACHI

Table of Contents
Chapter 1: Introduction..........................................................................................................2

1.1 Problem Statement.......................................................................................................2

1.2 Objective of the study..................................................................................................3

Chapter 2: Literature Review.................................................................................................4

2.1 Theoretical Framework Model....................................................................................6

2.2 Hypotheses..................................................................................................................6

Chapter 3: Research Methodology.........................................................................................8

3.1 Data Collection..........................................................................................................10

3.2 Data Analysis and Presentation.................................................................................10

References................................................................................................................................11

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Chapter 1:

Introduction
Developing economy of Pakistan needs the contribution of banks which dynamically can

change the ways of living standards of people Pakistan. The main purpose of banking

industry is to help poor people of Pakistan, which are living under the line of poverty

(Hashmi, Hashmi, & Irshad, 2014). Some of them are considered in middle class but due to

high rate of inflation and unemployment, these people are not earning profit and revenue

from their business to meet their household expenses, basic necessities and most importantly,

to do not contribute to the economy of the country (Aggarwal, 2014). Currently, the

economic condition of Pakistan is not up to the mark, due to high inflation, shortage of

electricity, poor transportation system, and business progress is generating not the expected

income or revenue to meet their financial expenses and many other related issues, which

ultimately weakens the economy (Haq & Kemal, 2007).

Commercial banks are working under the concept of primary and secondary business of

banking (Barth, Daniel, & Tara, 2009). The primary business of commercial banks is

considered as one of the collecting funds from the community and extended credit in the form

of loans to people for their useful purpose, improve business conditions and creating more

opportunities directly influences the economic growth (Berger, Allen , David , & Humphrey,

2007). Well reputed banking organizations are also involved in the nonbanking activities

which described subsequent operational functions to well perform its operations in the

community or society (Balfour & Wechsler, 1996).

Now a day, most of the commercial banks are considered as one of the most important and

most complex financial institutions in various countries (Bartholdy & Roger , 2010). Their

main aim is to develop the financial institutions system complex, secure and minimize the

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risk management factor and work for the betterment and improvement of financial

institutions working all around the global (Zsidisin, Panelli, & Upton, 2000).

This research study completely revolves around the investigation of the functionalities and

operational activities of banks, determining the way of living standard of middle class people

of Pakistan and how to overcome these problems from the help of the banking industry of

Pakistan. The strategic planning of banks is directly dealing with the problem of coordinating

with the customers and entire system (Golin & Delhaise, 2013). Today, in the presence of the

competitive business environment banking sector in Pakistan is facing many problems that

arise due to high default of the customers, recovery issues, late timings of the employees

working in the institutions, which demotivates the employees and lastly, many operational

problems.

1.1 Problem Statement

The main problem focused in the research study is that the current situation of Pakistan is not

very good as the economic position of Pakistan as compared to other developing countries is

low due to the high inflation rate, unemployment, energy crisis and many other related issues.

The focus of the study is to analyze the impact of banks on the developing of the economy

and bring improvement in the employment, inflation, expansion of the business and

improving the living standards of the people.

1.2 Objective of the study

Some of the objectives of the research study related to the Impact of Bank Loans in

Transforming Standards Of Living in Pakistan is presented as followed:

1) To determine and explore the impact of bank on the way of living standards of
middle class of Pakistan.
2) To examine and explore the impact on improvement in business current condition
and economic growth on the living standards of middle class of Pakistan.
3) To determine and examine the impact of business loan product facility on the living
standards of middle class of Pakistan.

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Chapter 2:

Literature Review
Today, competitive business environment banks play a progressive role for economic growth

and development (McConnell, C. R., 2008). It is analyzed that number of different research

studies have been conducted for specified area of bank loan business product facility for

improve the way of living standards in terms of people education, health, financial aid,

improve business scale and many other related activities performed for better outcome of

economy (Abbas & Christensen , 2007) (Ahmad & Bashir, 2013) (Christen, 2000) (Golin &

Delhaise, 2013). This research study will be conducted within the domain of the Pakistan. All

commercial banks and microfinance bank both plays a very dynamic role for development of

the economy. The main purposes of banks are to provide cash deposit facility and different

bank loan facility for changing the way of standards of people living in Pakistan (Kemal,

Din , & Qadir , 2007). Today, the current position of Pakistan economy is not up to the mark

due to many reasons such as inflation, shortage of resources, political instability, increase in

terrorism attacks and many other related activities performed leading towards the success of

banks working in Pakistan (Schriener & Yaron, 2005).

Banking sector of Pakistan plays a dynamic role work for economic growth (Barro & Robert ,

1996). It is analyzed that banking sector of Pakistan need more innovation leading towards

the new things, determine the human history, effectively utilized the financial resources for

more development and use the advance information technology system (Cao & Jian, 2006).

This latest information technology is normally use for accomplishment of organization goals,

development and improves its overall efficiency and performance (Ahmad & Bashir, 2013).

Most of the commercial banks use the service innovation factor is considered as suggested

type of innovation.

The term service is generally used for sale services (Alam, 2013). They create opportunities

for white collars and low wages jobs such as cleaner, diver, clerks that are working in banks

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 Impact of Bank Loans in Transforming Standards Of
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etc. (Hunter, John , Ronda , & Hunter, 1984). This type of services exists mainly in all the

sectors. For example, financial institution, telecom sector, healthcare services E-t-c. They

increase the demand for specialist workers such as design, research and development of

organization (Agba, Nkpoyen, & Ushie, 2010).

Their high inflation rate of the unemployment as well as decrease in level of economic also

increased in the Pakistan. This is the reason why the Pakistans inflation rate is high

especially, in the banking sector (Barth, Daniel, & Tara, 2009). All of the better know that

cannot directly impact the Pakistan but indirect impact to the others. Pakistan does not have

long term deposit issues but do have long term insurance loans to the customer (McConnell,

C. R., 2008) (Haq & Kemal, 2007). The high inflation rate and we know that the financial

crisis may rises, especially in the banking sector. This can affect the employees turnover rate

as well.

The average people are not liable to meet their daily expenses. This is not a good sign for any

developing country (Balfour & Wechsler, 1996). The concepts of commercial banks are not

new for us. From the last one decade the commercial banks entrance in the local market to

provide facilities to lower middle class and strengthen economy of Pakistan (Zott & Amit,

2010). The main purpose of commercial banks believe that reduction of poverty, control of

inflation rate, small and innovative ideas motivates people to start or establish their own

business in the local market. Its directly impact on the strength of the economy (Thurik, A.R,

2007).

The commercial banks got the high importance working in Pakistan with the passage of time

and utilization of the international funds to work for the progression of the economy

(McConnell, C. R., 2008). All of these commercial banks are working under the law, act,

policy and procedure of the government, central bank and State bank of Pakistan (Jamal &

Policy, 2008). Their main aim is to sales promotion of their loan products, saving schemes,

account opening facility, funds transfers and many other banking operational activities are

performed to facilities the illiterate people of Pakistan (Aboagye, Anthony, & Joan , 2009).

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 Impact of Bank Loans in Transforming Standards Of
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The main objective of the commercial bank of Pakistan is to deposit cash, fund transfer,

clearing check, loan facility to customers and many other operational activities performed to

fulfill the requirement of the customers and State Bank of Pakistan (World Bank access to

financial services , 2004). Both, the commercial banks and Microfinance institutions are

controlled by State Bank of Pakistan or central banks of Pakistan. The concept of

commercial banking is invented from Assyrians, Babylonians and Athenians starts the

banking functions and operations in Venice one thousand one hundred seventy-one

(McConnell, C. R., 2008).

The development of the commercial banking systems of Pakistan were recorded notable in

size and diversity operations. Numbers of various branches of same commercial banks were

opened in the region with the passage of time, funds and customer request and requirements

(Takang & Ntui , 2008). All of these commercial banks branches are interlinked with the

foreign banks to control the inflow and out flow of cash transactions.

These commercial banks of Pakistan also performed all the traditional function, activities,

dealing with the various products such as business loan facility, mortgage loan facility and

many other services, which are consistently updating and diversifying according to the needs

and requirements of the local and international customers or clients (Ali, KHAN, & AFZAL,

2012).

The economists of Pakistan are working for various purposes and develop different strategies,

policies and procedures have been adopted to overcome this problem. Well reputed

organization of Pakistan develops a network between the partnership, society and outreach

programs. This project PPAF continuously monitors and evaluates the performance,

efficiency and productivity of this program.

It is analyzed that the borrowers level of income and expenditure has improved after taking

the loan amount. The commercial banks loan product facility amount provides employment

opportunities, reduce the poverty and to some extend the way of living standards are change

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 Impact of Bank Loans in Transforming Standards Of
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(Zaidi, S, 2006). On the other hand, the thinking level of consumers has been change and

they all move towards the monthly saving. The way of living standard of poor people are low

as compared to other compared developing countries especially. It is also considered as the

important aspect and issue for the developing country. The researcher mainly focuses on the

lower middle class of Pakistan, people who are living under the line of poverty,

unemployment, economic growth, inflation and many other poverty issues as well (Abbas &

Christensen , 2007). Economic development refers to the desirable changes that are taking

place in the economic life of the people of developing countries. According to the research

study model of the rural financial institutions were based on the distribution of the micro

credit loan facility among poor or needed people of the society.

2.1 Theoretical Framework Model

The Theoretical Framework Model have been extracted from the related research which have

been simulated in the related area identifying and analyzing the impact of bank loans in

transforming standards of living in Pakistan. These independent variables are business loan

product facility (Schmenner & Roger , 1986), improve current business condition (Ali,

KHAN, & AFZAL, 2012), economic growth (Alfaro & Laura, 2004) and increasing

opportunity (Dadfar, Brege, & Semnani, 2013) Dependent variable is living standards (Sen

& Amartya , 1988) The theoretical frame work model is as follow:

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 Impact of Bank Loans in Transforming Standards Of
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Figure 1 Framework

2.2 Hypotheses
Some of the suggested hypotheses constructed on the variables extracted from past literature;

model and related theories are as followed:

Hypothesis 1:

Business loan product facility is positively associated with people living standards of
Pakistan.

Hypothesis 2:

Improvement in current business condition is positively associated with people living

standard of Pakistan.

Hypothesis 3:

Economic growth is positively associated with people living standard of Pakistan.

Hypothesis 4:

Increase opportunity is positively associated with people living standard of Pakistan.

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Chapter 3:

Research Methodology
Research methodology is considered as the main and important part of this study. The

researcher mainly focuses on the systematic approach of the theoretical framework model of

the study. Research methodology is based on the various phase that are helpful for the

researcher is to analyze the data in meaningful form. First phase of this research methodology

will be based on defined the problem statement. In this research study, the main problem that

the current situation of Pakistan is not very good as the economic position of Pakistan as

compared to other developing countries is low due to the high inflation rate, unemployment,

energy crisis and many other related issues.

The focus of the research study is to analyze the impact banks on the developing of the

economy and improving the employment, inflation, expansion of the business and improving

the living standards of the middle class and practical implication as well (Hashmi, Hashmi, &

Irshad, 2014). Secondly, phase of the research methodology will be about the review of

literature based on the similar, past and previous research literature, theory and model which

is helpful for the researcher to develop the theoretical framework model and suggested

hypotheses according to the related topic. Thirdly, phase of this research methodology is the

research design, due to the fund and time constraint the researcher will be focusing on the

specified area for the data collection of the study.

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Figure 3-2 Research Methodology

Design of this research study will be based on two main sources of the research data that are

primary data and secondary data. The primary research data will be used for data collection

with the support of questionnaires, and secondary data will be including the journals,

internets sources published and unpublished data and many other related data. The research

methodology is also presented in the Figure 3 -2 Research Methodology. The researcher will

be using the multi feedback function approach that has been utilized in the research

methodology. So in this case, if the researcher wants to move back to some previous stage the

research can get back to the required stages. Waterfall techniques will not be applied in the

research methodology rather systematic approach will be applied. As the research study is

based on the primary data techniques, so the research required to move back to previous

stages and in some cases the feed forward will also be utilized depending upon the

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requirements. The data will be analyzed through the integration of various tools and then

conclusion and recommendation about the data analysis and future direction as well will be

provided.

3.1 Data Collection

In this research study, two main sources of data will be utilized. Primary source of data will

be considered through the information collected from the questionnaire technique. The

selected number of respondents will be participating in the research study for sharing their

views through the filling of questionnaire. Secondary source of data will be utilized in the

literature review where past research studies conducted by past researchers will be

considered.

3.2 Data Analysis and Presentation

The data collected from the selected number of respondents will be deeply analyzed so that

research findings and interpretations can be extracted. Data Analysis will be conducted

through the application of multi regression, CHI Squared and correlation analysis. The

collected data will be transformed into various graphs so that analysis can be effectively

conducted.

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