Branchless banking gradually taking acceptable roots in general society
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.