Bifurcated banking: the political economy of inclusive finance in Pakistan

How inclusive is inclusive finance? In this thesis, I examine a phenomenon which I describe as ‘bifurcated banking’. Exploring the case of Pakistan, I observe that policies of inclusive finance generate a heterogeneous financial space. The institutionalisation of inclusive finance leads to the emergence of a bifurcated banking system. Such a system is defined by mainstream commercial banks based on a traditional bank intermediation model on the one hand, and inclusive finance based on a disintermediated, or shadow banking model, on the other. My study of the Pakistani financial system shows that a bifurcated banking system is not transitory, but a structural feature of a developing capitalist country, where key relationships between inclusive finance and access to finance are best understood through what I call, shadow financial citizenship. My thesis is organised as two parts. In the first part, I develop a conceptual lens to analyse bifurcated banking. In the second part, I use Pakistan as a case study of inclusive finance to examine the core themes and concepts identified above.