Bank reports show that most of their lending was to the so called priority sectors: largely manufacturing sector and export industries. A significant proportion of these loans, however were also relent by these corporates to their subsidiaries in the real estate sector. This fungibility of money undermined the effectiveness of moral suasions and administrative control within a liberalized financial system. Table 5 sets out the sectoral credit allocation of BIBF out-in lending where the shares of credit extended to the real estate and property sectors reportedly remained unchanged at around 3 percent of total BIBF loans, making it difficult to detect potential misallocation of resources.
Yet, during this boom period of massive capital inflows, both the stock and property markets were experiencing sharp increases in the order of 50 to 90 percent annually between 1987-9(Figure 1)