Stock Market Investment Barriers in South Asia: A Systematic Review of Retail Participation and Reforms in Pakistan, India, and Bangladesh

Abstract

This Systematic review examines the paradox of remarkable growths in the Pakistan Stock Exchange (PSX) the KSE 100 Index, increased from 1508 points in 2000 to 177,040 points till june 2026, while the retailer investor participation was extremely low at 0.2% of adult population. The review identifies four major factors responsible for the underdevelopment of Pakistan’s retail investor Culture: low trust in financial Institutions due to broker defaults and weak regulatory enforcement, Limited financial literacy with only about one quarter of adults considered financial literate, Complex tax procedures and poorly aligned incentives, and Market Volatility with macroeconomic instability. Regional comparison shows that regulatory incentives in india, such as the investors protection fund introduced by SEBI in 1993 and digital KYC system, had significantly improved investor confidence and market accessibility. It proposes five policy recommendations: establish a PKR 50 billion investor protection fund, introduce a mobile based KYC system, integrate financial literacy education with school curriculum from Intermediate classes, implementation of 3 years tax amnesty for first time investors, and create a dedicated PSX Techboard for SMEs. It estimates that implementation in 18-24 month period could lead to 20% increase in retail investment accounts, 100,000 new accounts, attracting 50 SMEs listing and generating PKR 10 billion in long-term tax revenue. This review contributes to literature on financial inclusion in emerging markets by providing the first systematic 2000-2026 data driven analysis of Pakistan’s retail investor trust deficit, offering policy recommendations based on international evidence to create a more inclusive democratic capital market.