Abstract:
Financial Innovation is considered to be the heart of financial sector. Much of the
growth in the developed economy today is considered to be a result of the ongoing
financial innovation throughout centuries. However, with the 2007 global
financial crisis, the status of financial innovation is being questioned worldwide.
Although, it is the developed economies that have been hit the hardest, emerging
economies could also feel its trickle down effects.
With growth rates at their lowest worldwide and the super power being hit by one
of the worst recessions in its history, the financial world is the most uncertain.
Debates about the importance of financial innovation have heated up with a vast
majority trying to make sense out of what went wrong with all the years of
innovation. The negative impact of financial innovation can be devastating, it can
wipe away all the progress you’ve made over the years, and such has been the
case in 2007.
The problem now lies for emerging economies like Pakistan that have recently
opened up their markets to the world and want to create a place in the global
financial arena. On one hand there are economist like Paul Volcker (former
advisor to President Barak Obama) who consider all the modem financial
innovations a waste of time and resources and on the other there are figures like
Dr. Shamshad Akhter (former Governor State Bank of Pakistan), who think
sophisticated financial innovation is the answer to most of Pakistan’s economic
problems.
This study mainly focuses on this argument with reference to Pakistan. Through
research and logical argument backed by sound evidence it tries to proof that
financial innovation is important for the growth of Pakistan’s economy and if the
issue is dealt with responsibility it will produce unimaginable results for
Pakistan’s financial industry.
