Branch­less bank­ing grad­u­ally tak­ing ac­cept­able roots in gen­eral so­ci­ety

The Pak Banker - - BUSINESS -

The his­tory and evo­lu­tion of broad­band in­dus­try is known to se­niors, of how hun­dreds of smaller In­ter­net Ser­vice Providers (ISPs), tel­cos and other stake­hold­ers cre­ated a de­mand through real hard for high-speed broad­band DSL in Pak­istan.

It took th­ese small com­pa­nies over 10 years reach to a point where ground­work was laid and a clear de­mand for DSL ser­vices sur­faced, cul­mi­nat­ing in the start of a dig­i­tal Pak­istan. It was dur­ing this time that gi­ant play­ers - who were pre­vi­ously silently ob­serv­ing the whole game play as a part of their strat­egy - jumped into ring with strong fi­nan­cial mus­cle that no one could com­pete with. As a re­sult, due to deep pock­ets of gi­ant play­ers, in­no­va­tion in ser­vice and par­tic­u­larly strate­gic mar­ket po­si­tion­ing, smaller ISPs and star­tups - who had ini­tially built ground for broad­band were wiped out of the busi­ness. Be­ing a wit­ness of that big­ger game, peo­ple fore­see same sit­u­a­tion in Branch­less Bank­ing (BB) in­dus­try at present that cur­rently thrives on two ma­jor rev­enue streams - Over the Counter (OTC) 80 per cent and Wal­lets 20 per cent.

In or­der to com­pre­hend the over­all sce­nario, it is im­por­tant to per­ceive dy­nam­ics of Branch­less Bank­ing of­fer­ings and how Branch­less Bank­ing was in­tro­duced. Across the globe, the fi­nan­cial ser­vices ac­ces­si­bil­ity re­mained re­stricted to a small set of over­all pop­u­la­tion due to var­i­ous reg­u­la­tory and other due dili­gence re­quire­ments. This cre­ated a need for de­vel­op­ing a sep­a­rate pro­gram and in­fra­struc­ture with re­laxed cri­te­ria fo­cus­ing on fi­nan­cial re­quire­ments of rel­a­tively lower seg­ments of so­ci­ety and thus paved way for Branch­less Bank­ing set-up to serve fi­nan­cial in­clu­sion cause for masses in a much bet­ter and im­proved way.

Ac­cord­ing to World Bank, around 2 bil­lion peo­ple do not use for­mal fi­nan­cial ser­vices and more than 50 per cent of adults in un­der-priv­i­leged seg­ment are de­prived of bank­ing ser­vices. Fi­nan­cial in­clu­sion is piv­otal for poverty al­le­vi­a­tion and re­search has shown that the pop­u­la­tion's ac­cess to fi­nan­cial ser­vices also in­creases their chance for sav­ings and can have large long-term ben­e­fits.

In light of im­por­tance given to fi­nan­cial in­clu­sion and its proven ben­e­fits in poverty re­duc­tion, Pak­istan has also taken sev­eral steps in this re­gard which in­cluded in­tro­duc­tion of a reg­u­la­tory frame­work for mi­cro-fi­nance banks, es­tab­lish­ment of a spe­cial­ized mi­cro-fi­nance Credit In­for­ma­tion Bureau, launch of na­tion­wide fi­nan­cial lit­er­acy pro­gramme and sub­si­dized lend­ing schemes that demon­strate se­ri­ous in­ter­est in this seg­ment.

When con­tacted, ex­perts on Mon­day said in com­par­i­son to other play­ers in this re­gion, Pak­istan is still in early stages of life cy­cle and there is a huge room for im­prove­ment. The ex­perts said fi­nan­cial in­clu­sion is a key so­cio-eco­nomic chal­lenge and one that is of in­ter­est to in­ter­na­tional fi­nan­cial in­sti­tu­tions, cen­tral banks, gov­ern­ments and pol­icy mak­ers alike.

This is ev­i­dent from the fact that the World Bank has set a goal to achieve uni­ver­sal fi­nan­cial in­clu­sion by 2020. Pak­istan had an abysmal per­cent­age rang­ing be­tween 7-8 per cent of cus­tomers hav­ing a con­ven­tional bank ac­count at a fi­nan­cial in­sti­tu­tion in 2014 while this av­er­age stood at 45.5 per cent for South Asia. Other vari­ables em­ployed to mea­sure us­age of fi­nan­cial ser­vices give a sim­i­lar pic­ture. Av­er­age bor­row­ing from a fi­nan­cial in­sti­tu­tion was al­most neg­li­gi­ble at 1.5 per cent whereas other South Asian mar­kets stood at 6.4 per cent for 2014. Sim­i­larly, sav­ings at a fi­nan­cial in­sti­tu­tion stood at a mere 3.3 per cent for 2014 rel­a­tive to South Asian av­er­age of 12.7 per cent. More­over, the ex­perts said lack of aware­ness and train­ings of such ser­vices is the big­gest rea­son for such low per­cent­ages.

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