engaging in these activities and universal banks may also be able to control the equity participation in the industrial firms. the implementation of the relevant european union directives and the rise of mergers and acquisitions between banks, securities companies and insurance companies support the universal nature of european banking. the us and european banks are able to offer sophisticated financial products, establish international conglomerates putting pressure now on asian banks to improve the product offerings in their own markets. although universal banks already exist in many asian countries, in general, asia lags behind in this aspect. not all asian countries permit universal banking. for example in china, the law strictly segregates banking and securities related activities based largely on the conflict of interest concerns and unique situations arising from the government ’ s dominant role in the banking sector and the securities markets, both in the capacity of owner as well as regulator. to me whether we take this route or that route, it is important for us to have some reflection because we need economies of scale, and we need credit diversification and efficient delivery of financial services. in order for us to compete, we need to look at the other structures. similarly, we all know about what has been going on in the insurance and pension system as reforms there have been delayed so much that i feel that we should now look at more innovative structures. before we delve into any of these areas, as regulators, we need to reflect about which regulatory framework would be appropriate. finally the other point which i want to talk about is the need for us to be risk - takers in the financial markets. as a central bank, i feel that we have done our job by introducing the necessary regulations and the framework for derivatives and products of that nature. these regulations provide guidelines for transacting otc derivatives in the country and currently permit three types of derivative transactions : 1. foreign currency options ( fx options ), 2. forward rate agreements ( fras ) and 3. interest rate swaps ( irss ). so far we have managed to grant the status of the authorized derivatives ’ dealers to three banks : standard chartered bank, citibank and united bank limited. the use of financial derivatives is a recent phenomenon in pakistan and the first such real derivatives transaction took place in august 2003 which was a rs. 100. 0 million fra. during the last one and a half years, the derivatives market has grown considerably. besides the plain vanilla products as mentioned a minute before, the market is slowly and gradually moving towards more

dfid. as a precursor to this program, sbp has already formulated a microfinance strategy which aims to enhance the outreach of microfinance industry to 3 million by 2001 though efforts are underway to fast track this and to reach 10 million in next few years. in conjunction with this, sbp is working with the industry to enhance outreach by proper exploitation of the avenues available for promoting state of the microcredit summit campaign report 2007. credit for small and medium enterprises and agriculture and rural finance. while financial penetration ratio is quite low in pakistan, the growth in outreach has improved : for instance : ( i ) number of microfinance beneficiaries have tripled to 1. 5 million over the last two years, ( ii ) number of agriculture borrowers increased to 2 million by the end of this fiscal year, with agriculture credit rising from just over rs50 billion in fy03 to almost rs200 billion in fy07 ; and ( iii ) number of small and medium enterprise borrowers rose from 91, 663 in dec 2003 to nearly 190, 000 in dec 2007. 18. through this forum, i would like to invite other stakeholders including standard chartered bank ( scb ) to join us and dfid – together to further augment the financial inclusion program. pakistan has laid sound financial sector legal, policy, regulatory and supervisory framework and has now an elaborate banking and microfinance industry infrastructure which, if effectively, nurtured and exploited can pave way for better results in extending outreach.