A Study on Non-Performing Loans of the Pakistani Banking Industry during Different Political Regimes

  • Babar Ansari Greenwich University, Karachi - Pakistan
  • Fatima Javaid Institute of Business Management, Karachi - Pakistan
  • Rabia Sabri Institute of Business Management, Karachi - Pakistan https://orcid.org/0000-0002-9135-2137


Abstract Views: 64

Pakistan has been suffering political instability since its inception in 1947. A mix of military and democratic regimes has ruled the political system. The Pakistani government has been suffering many problems due to an unstable political structure since then. The banking sector is considered one of the key components of any economic system. In contrast, a high volume of NPLs prevailing in the banking industry may affect the profitability of this sector. This reach study tries to investigate the performance of the Pakistani-banking sector under the democratic regime and military regime, mainly from 1996 to 2017. This tenure has a combination of military and democratic governments. In this regard, the Mann-Whitney test compares the average NPLs for both regimes. This study has examined the banking sector’s loan performance under military and democratic regimes using NPL (gross) and NPL ratios. It is found that NPLs (gross) were low during military regimes while the democratic government has more NPL (gross), with an increasing trend over the years. The average growth in NPLs (gross) was observed as 8.1 per cent per annum during the tenure of the research study. 

Keywords: Banking Industry, Democratic regime, Military regime, Non-performing loans, NPL ratio


Abbas, Kalbe, and Manzoor Hussain Malik. "Impact of financial liberalisation and deregulation on banking sector in Pakistan." The Pakistan Development Review (2008): 287-313.

Adhikary, Bishnu Kumar. "Nonperforming loans in the banking sector of Bangladesh: realities and challenges." Bangladesh Institute of Bank Management 4, no. 26 (2006): 75-95.

Alam, Shafiqual, Md Mahabubul Haq, and Abdul Kader. "Nonperforming loan and banking sustainability: Bangladesh perspective." International Journal of Advanced Research 3, no. 8 (2015): 1197-1210.

Bahrini, Raef. "Empirical analysis of non-performing loans in the case of Tunisian banks." Journal of Business Studies Quarterly 3, no. 1 (2011): 230.

Baudino, P., and H. Yun. "Resolution of non-performing loans–policy options. BIS, Financial Stability Institute." (2017).

Brömmelhörster, Jörn, and W. Paes, eds. The military as an economic actor: Soldiers in business. Springer, 2003.

Caprio, Gerard, and Daniela Klingebiel. Bank insolvencies cross-country experience. World Bank Publications, 1996.

Cheema, Faisal. "Macroeconomic stability of Pakistan: the role of the IMF and World Bank (1997-2003)." ACDIS Occasional Paper (2004).

Drake, Pamela Peterson, and Frank J. Fabozzi. The basics of finance: An introduction to financial markets, business finance, and portfolio management. Vol. 192. John Wiley & Sons, 2010.

Fendi, U., I. Sawalha, Jamal Shamieh, and Osama Omar Jaara. "Early Warning Indicators for Monitoring Non Performing Loans in Jordanian Banking System." International Journal of Business and Social Science 8, no. 6 (2017): 104-114.

Festić, Mejra, Alenka Kavkler, and Sebastijan Repina. "The macroeconomic sources of systemic risk in the banking sectors of five new EU member states." Journal of Banking & Finance 35, no. 2 (2011): 310-322.

Firth, Michael, Chen Lin, Ping Liu, and Sonia ML Wong. "Inside the black box: Bank credit allocation in China’s private sector." Journal of Banking & Finance 33, no. 6 (2009): 1144-1155.

Geddes, Barbara, Erica Frantz, and Joseph G. Wright. "Military rule." Annual Review of Political Science 17 (2014): 147-162.

Goel, Rajeev K., and Iftekhar Hasan. "Economy-wide corruption and bad loans in banking: international evidence." Applied Financial Economics 21, no. 7 (2011): 455-461.

Hayat, Muhammad Nauman, Kaneez Fatima, Uzma Mukhtar, and Safia Bano. "Economic performance of pakistan under democracy and military regimes." Journal of Economics, Business and Management 4, no. 12 (2016): 690-694.

Huntington, Samuel P. Political order in changing societies. Yale University Press, 2006.

Husain, Ishrat. "Economic reforms in Pakistan: one step forward, two steps backwards." The Pakistan Development Review 51, no. 4 (2012): 7-22.

Keeton, William R. "Does faster loan growth lead to higher loan losses?." Economic review-Federal reserve bank of Kansas City 84, no. 2 (1999): 57.

Khalabat, Amna. "History of banking in Pakistan–of humble origins and vast potential." The Express Tribune (2011).

Podpiera, Richard. "Does compliance with Basel Core Principles bring any measurable benefits?." IMF staff papers 53 (2006): 306-326.

Rehman, Ramiz, Inayat Ullah Mangla, and Junrui Zhang. "Chinese banking reforms: an analysis and evaluation of non-performing loans." The Pakistan Development Review (2016): 563-578.

Siddiqa-Agha, Ayesha. "Military inc.: Inside Pakistan's military economy." Oxford University Press. (2007).

Taylor, Bill, Gautam Sinha, and Taposh Ghoshal. Research methodology: A guide to for reseachers in management and social sciences. PHI Learning Pvt. Ltd., 2006.

Vatansever, Metin, and Ali Hepsen. "Determining impacts on non-performing loan ratio in Turkey." Journal of Finance and Investment Analysis 2, no. 4 (2013): 119-129.

Waqas, Muhammad, and Muqaddas Khattak. "Democracy in Pakistan: Problems and Prospects in Making Informed Choices." International Journal of Social Sciences and Management 4, no. 1 (2017): 9-11.

How to Cite
Ansari, B., Javaid, F., & Sabri, R. (2023). A Study on Non-Performing Loans of the Pakistani Banking Industry during Different Political Regimes. Journal of History and Social Sciences, 14(1), 140-160. https://doi.org/10.46422/jhss.v14i1.277