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"Has privatization reduced the proportion of Non-Performing Loans and increased bank performance in Pakistan": Muslim Commercial Bank and Allied Bank Limited (Pre-privatization and Post-privatization comparison)
Umeå University, Faculty of Social Sciences, Umeå School of Business.
Umeå University, Faculty of Social Sciences, Umeå School of Business.
2009 (English)Independent thesis Advanced level (degree of Master (Two Years)), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

Privatization has become an important aspect all over the world especially in developing countries of the world. Pakistan has also embarked on privatization program for the state-owned financial sector. As this report is limited to banks so we have selected banks which were privatized in the decade of 1990-2002 and the topic on which we have emphasized is Non-Performing Loans.


This thesis is based on the two main things, firstly privatization of government owned banks and secondly Non-Performing Loans proportion with respect to the effect of privatization. Privatization of government owned banks in Pakistan was the main reason behind the overcome of weak banking sector and as part of this policy, for the very first time in 1991, two government owned banks of Pakistan Muslim Commercial Bank (MCB) and Allied Bank Limited (ABL) were converted into private entities.


In first step authors have tried to collect data regarding the history of Pakistan as an economic instrument, why privatization in banking sector was important, review of banking sector and its performance in Pakistan and Non-Performing Loans and its classification with respect to privatization in the banking sector.


Banking sector is considered as one of the most important sector of every country and there are so many measures to gauge the performance of the banking sector. There are many measures utilized to gauge the performance of the banking sector like measuring asset quality, capital adequacy, earning, profitability, liquidity. Out of these performance measures this study is targeted towards gauging the “operating performance” of banks keeping in view the global performance. We have taken one specific measure that is “Non-Performing Loans” of selective banks to find out the operating performance of the banking sector and impact of privatization has been kept in mind to find out the results. So the scope of the study is to find out the impact of privatization on performance of banking sector and the area of the study is Non-Performing Loans.


The nature of the topic puts on view that that it cannot be studied in artificial environment. The topic has been analyzed in natural environment without any involvement, so the research is more of exploratory research and as well as descriptive. The purpose of the study is “Exploratory” in nature, as it aimed to collect and create appropriate information related to the topic. The method of conducting this research is based on secondary data. We have adopted the secondary data collection method, for that we have gone through the newspapers, internet, books, magazines, annual reports, articles and different libraries have been investigated.


For the empirical studies, we have taken observations from two different banks: Muslim Commercial Bank (MCB) and Allied Bank Limited (ABL) and we have done the comparison of means between their pre-privatization period and post-privatization period respectively to assess the impact of privatization on Non-Performing Loans. To compare the means we have use SPSS software.


We looked at the Group Statistics in which we compared Levene’s Test for Equality of Variances to find out the variance result. Secondly we looked at the Independent Samples T-Test to compare means and finally to prove the hypothesis we looked at Confidence Interval of both the observations. We can conclude that Banks performance has improved on the basis of results of only one factor that is Non-Performing Loans and  has a positive impact on NPLs overall and performance of banks have gone upward due to decrease in Non-Performing Loans percentages. We can’t say that banking sector performance has improved overall, because there are so many factors from which we can have different results but as our research is limited to only one factor that is NPL, hence on the basis of that we conclude that privatization has a positive impact on Non-Performing Loans of two banks of Pakistan which we have studied.

Place, publisher, year, edition, pages
2009. , 72 p.
National Category
Business Administration
URN: urn:nbn:se:umu:diva-32051OAI: diva2:300716
Social and Behavioural Science, Law
Available from: 2010-03-02 Created: 2010-02-28 Last updated: 2010-03-16Bibliographically approved

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