The role of cutting edge technologies in the financial inclusion process in Pakistan


Faizan Ahmed


Master of Business Administration Executive

Faculty / School

Faculty of Business Administration (FBA)

Year of Award

Spring 2018

Project Type

MBA Executive Research Project

Access Type

Restricted Access


Developing countries | Banks and banking | Financial institutions

Executive Summary

According to a survey of the world's unbanked, globally 50% of them say they don't have enough money to use the banks while 30% of them say they don't have a bank account because they do not need one. This points to an opportunity on the demand side, i.e.the demand for more bank accounts can be increased by lowering the cost of these services and creating more awareness about their benefits. On the supply side, key opportunities exist in the following areas: 1. G2P payments digitization can provide foundation for building P2P, remittances and other forms of services. Around 20% of the global unbanked receive government transfers or wages in cash. Handling these transfers through digital means will bring around 8% or 2 million unbanked Pakistani adults into the banking system. 2. Most of the unbanked use domestic remittances regularly to transfer money to their loved ones. 3. Another opportunity exists in agriculture products. Around 105 million South Asian unbanked receive payments for agricultural products. 4. Lastly formalizing the savings for the unbanked is another important supply side initiative. A number of recent developments have created an enabling environment for disrupting the financial inclusion methods that have been available in the past. Some of these factors are: ~ The ubiquitous availability of mobile phones in the masses(72% of Pakistanis have a mobile phone connection-] ~ 100% of the telecom subscriber base (140 million subscribers) is bio metrically verified ~ Broadband is now available to 40 million customers and since the launch of 3G and 4G LTE services, 1.3 million new customers are adopting broadband every month- ~ Pakistan has electronic and bio metric record of all of its citizens maintained through NADRA ~ The use of social media is on the rise with approximately 44 million users. Similarly, there have been a large number of initiatives under the able leadership of the State Bank of Pakistan, that indicate the will and intent of the government to move things in the right direction. Some of these initiatives are: ~ The creation of regulatory framework for micro finance institutions (2001) ~ The expansion of electronic credit information bureau, eClB (2005) 1 PTATPSP License memorandum 2 PTATPSP License memorandum ~ The establishment and expansion of Pakistan inter bank gross settlement system PRISM(2008) ~ The adoption and modernization of branch less banking regulations (2008,2011) ~ The establishment of a micro finance credit information bureau, mCIB (2012) All this innovation in the financial inclusion has been recognized globally when in 2011 and 2012, Pakistan's MF regulations were ranked best in the world. In 2015, the State Bank of Pakistan (SBP) along with the Ministry of Finance (MoF) and Securities and Exchange Commission of Pakistan (SECP),formed a consultative group to formulate the National Financial Inclusion Strategy (NFISP. The NFISis created with the aim to engage the industry stakeholders to promote the usage of financial systems among the masses. Specifically, NFIS targets that by 2020 the number of account holders should increase from 10% of the adult population to 50%. Similarly, the formal savings should go up to 10% from current figure of 1%. It also aims to work on consumer protection and creating awareness among the masses about the utility of the financial services. Micro finance industry comprising of MFIs, MFBsand RSPs (Rural Support Programs) is also playing an important role in financial inclusion in the country. Out of these three only MFBsare regulated by SBPand it accounts for around 40% of active borrowers. MFIswhich account for majority of borrowers practices mostly group lending. MF sector accounts for 3.1 million borrowers which is around 12% of the market potential. Asper SBP reports, MFBshold 27.3 million mobile wallet accounts which is a tremendous growth considering that the number for June 2016 was 14.6 million. However, the number of active mobile wallets in the country is only 48% or 13.1 million. On the distribution side too, MFB shave made great progress. They have established a vast network of branch less banking network comprising of around 400,000 agents. These agents represent an important element of the overall MFB setup as they provide the crucial OTC services for the unskilled population in the remote areas of the country. Some of the prominent players in the MFB sector are Mobilink [jazzcash, Telenor Easypaisa, UBLOmni and HBLExpress. This report presents a thorough study of the current market situation, the key stakeholders and actors in the market and attempts to take a snapshot of the most recent demand side and supply side situation in Pakistan.

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