Financial Services and Consumers
The importance of financial services in the development of any economy cannot be overemphasized as it promotes entrepreneurship, generates employment, fosters innovation, reduces poverty levels and enhances social equality.
Therefore, SBP, as part of its financial sector development strategy is actively promoting financial inclusion. Financial Inclusion refers to the process of promoting affordable, timely and adequate access to a wide range of regulated financial products and services and broadening their use by all segments of society through the implementation of tailored and innovative approaches including financial awareness and education with a view to promote financial wellbeing as well as economic and social inclusion.
To add further emphasis and urgency to the issue of financial inclusion, I would like to share that financial sector in Pakistan remains restricted in its outreach as the majority of population remains either excluded or informally served. This limited access is reflected in the total number of bank accounts, presently around 32 million, and the total number of borrowers, which is only 5.7 million. This high level of financial exclusion is largely attributed to two major factors. Firstly, on the supply side, there is lack of appropriate product offering by financial service providers primarily influenced by their typical hesitance towards the informal and low income segments of the population and lack of geographic presence.
Secondly, on the demand side, there is lack of public awareness about availability of financial services and products.
SBP is cognizant of high financial exclusion in the country and is fully committed to tackling the associated challenges in a sustainable manner. State Bank of Pakistan is pursuing a multi-pronged financial inclusion strategy through the following:
1. SBP introduced Basic Banking Account (BBA), requiring commercial banks operating in Pakistan to offer BBA to facilitate and provide basic banking facilities to the low income people in Pakistan. A typical BBA can be opened with a minimum deposit of Rs1,000 carrying no fee, no limit of minimum balance and offering full ATM facility.
2. SBP has introduced the Annual Branch Licensing Policy which requires commercial banks with 100 branches or more to open at least 20% of their branches outside big cities and set up branches in Tehsil Headquarters where no branch of any bank exists.
3. SBP has developed a world class regulatory framework to enable commercial microfinance and branchless banking in Pakistan. These regulations enable alternative approaches and models for delivery of propoor and low-income financial services and products while ensuring institutional viability, broadening access, financial integrity, and proconsumer practices. 4. Pakistan is amongst the few countries that have a national microfinance strategy which not only identifies drivers and bottlenecks to growth but also provides an implementation plan drawn along side with industry stakeholders to monitor progress against the identified targets.
5. SBP has partnered with the UK Department for International Development (DFID) and other donors to launch programs to increase access to finance in the country. The DFID-funded Financial Inclusion Program (FIP) aims to address financial exclusion through a variety of interventions. FIP focuses on marketbased, sustainable financial services for low income people and small enterprises. In addition, FIP aims to enhance delivery of financial services through technology based branchless banking solutions, financial innovation, and remittances. FIP has provided support to a number of initiatives to enhance supply of and access to