Spurred by a favorable regulatory and technology environment, Pakistan is witnessing dramatic growth in branchless banking, according to a March 14, 2012 report by the State Bank of Pakistan.
Here are some of the key indicators contained in the State Bank report:
1. Number of branchless banking accounts jumped 40 percent to 929,184 in October-December 2011 (Second quarter of FY2011-12) from the preceding three month period.
2. Total amount of branchless banking deposits surged 169 percent to Rs 503 million in Oct-Dec 2011 from July-September 2011.
3. Number of branchless banking transactions during the second quarter rose 30 percent to 20.6 million while the value of transactions showed a growth of 35 percent to reach Rs. 79,410 million.
4. Branchless banking agents network in Pakistan grew by 16 percent in the second quarter (October- December 2011) of current fiscal year 2011-12 to reach 22,512 agents covering the entire length and breadth of the country.
5. The average size of branchless banking transaction was Rs 3,855 while the average number of daily transactions was 228,855.
6. Bills payment and mobile phone SIM card top-ups remained the dominating activity in the quarter under review with 53 percent share in total number of transactions, followed by fund transfers and deposits with share of 39 percent and 8 percent respectively.
7. While P2P payments remained the most popular mechanism with 74pc share in the total funds transfer, mobile branchless banking is penetrating all areas of payments such as utility bills, Government-to-Person (G2P) and Person-to-Person (P2P) payments while scaling up other services relating to deposits and loans.
A 2011 report by World Bank's Consultative Group to Assist the Poor (CGAP) describes Pakistan's mobile banking as "a unique laboratory for innovation". Here's an excerpt from it:
"Branchless banking regulation was first introduced in Pakistan in April 2008. From the beginning, the State Bank of Pakistan (SBP) has taken a constructive regulatory approach by providing clear guidance and being willing to listen to businesses and adjust regulation where necessary. A variety of business models is emerging that involves a wide range of players, including mobile network operators (MNOs), technology companies, and even a courier business. (Notably, a bank remains ultimately liable to SBP in all the models.) The government is further encouraging innovation by piloting the use of branchless banking to distribute government payments. Taken together, these factors make Pakistan a unique laboratory for innovation."
In a country where only 22% of the population owns bank accounts and more than 62% owns mobile phones, mobile banking is proving to be the fastest way to promote financial inclusion considered by experts to be essential to lift people out of poverty. Benefits include easy access for rural customers to banking services through agents in villages without bank branches, better documentation of the economy, enlarging of the tax-base and efficiency of economic transactions.
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eFinancal News reports that commodities spot market & mobile payment system are planned for Lahore, Pakistan:
According to local media reports, the managing director for the Lahore Stock Exchange, Aftab Chaudhry, has announced that the exchange will look to set up a spot trading platform to enable farmers in Punjab to access better prices and allow banks to provide post-harvest financing to them.
Local regulator, the Securities and Exchange Commission of Pakistan, is already considering an application to establish a spot trading platform. Chaudhry said that if approval is not granted soon, the exchange would take matters into its own hands by establishing its own spot market using regulations governing co-operatives.
Chaudhry was reported to have described its own current spot commodity market as "opaque" with the pricing process dominated by middlemen.
A regulated spot market would allow farmers to access the best prices and also enable banks to lend more easily to them during the off-season once they have guarantees that the prices are an accurate reflection of the market.
Chaudhry said that the exchange is in advanced talks with many potential partners to establish the spot exchange by the end of 2012. The aim is to provide a trading system that combines both exchange technology and a mobile payment system using Singapore's Utiba system.
Utiba is currently used in more than 30 countries offering mobile payments and trading. Its mobile platform currently supports 500 million subscribers and processes over 12 billion transactions per year.
Agriculture is a key export for Pakistan, accounting for 21% of the GDP and 80% of the country’s total export earnings, with Punjab accounting for 29% of Pakistan's exports, according to figures compiled by the Punjab regional government. The main crops are cotton, wheat, rice, sugarcane and maize.
Pakistan already has a mercantile exchange, where futures are traded. Set up in 2007, the Pakistan Mercantile Exchange is licensed and regulated by the Securities and Exchange Commission and was the first technology driven, web-based commodity exchange in Pakistan. It has a 100% institutional shareholding.
Pakistan gets World Bank grant to set up mobile development lab for South Asia, reports Express Tribune:
In a move that would help spur the already booming development of IT content, Pakistan has beaten off competition from regional countries to bag World Bank’s contract for setting up a research lab for mobile software development including apps, The Express Tribune has learnt.
Pakistan Software Export Board – the agency tasked with the implementation of the project – has not made any official announcement, however, a well informed official told the Express Tribune that World Bank approved $380,000 in grants to Pakistan in November 2011 for a two-year project, mLab South Asia, to be set up in Lahore.
World Bank’s division InfoDev planned to establish five mobile software development research labs across the world including one in the Saarc region, the official said. India and Sri Lanka were also shortlisted for the region but Pakistan was picked as the final destination.
The business plan focuses on combining arts and science schools under the umbrella of PSEB. “We proposed that we will bring these two communities together for content-based applications,” a PSEB official who requested anonymity. “Our plan inspired them and we won the grant to set up the lab, he added.
PSEB is leading the project while Indus Valley School of Arts and Architecture, National College of Arts, and University of Engineering and Technology (UET) are among the implementation partners, the official said. The lab will be setup at UET, he added.
The purpose of the project is to establish mobile labs as specialised business incubators supporting mobile technology entrepreneurs, application developers and innovators, said infoDev Senior Communications Officer Angela Bekkers in an e-mail.
Bekkers said the grant comes from a Finland-financed trust fund, managed by infoDev, a global partnership programme in the World Bank. InfoDev’s mission is to enable innovative entrepreneurship for sustainable and inclusive growth, she added.
The blue print of the project is ready, according to PSEB official, and WB has already released the first year installment of $240,000 to PSEB earlier this year. The paper work is complete, courses have been designed, events have been planned for tech and art people, he said. The project will be executed after PSEB disburses funds to implementation partners. Pakistan Software Export Board did not respond to email queries sent by The Express Tribune.
Entrepreneurship to stimulate economic growth in Pakistan:
..Wayne Beeson, supporter of Expeditionary Economics and other entrepreneurial economics initiatives, spotlights and recommends in his blog the entrepreneurship-based Expeditionary Economics model for Pakistan and similar countries to stimulate and sustain economic growth. He explains that Expeditionary Economics was put forth by The Kauffman Foundation in 2010 as an alternative to the largely ineffective international economic development policies of the U.S. State Department for the purpose of developing economic growth in areas where the U.S. is involved in counterinsurgency missions or disaster relief. Economic growth is vital for the stability of countries challenged by war and disaster. Mr. Beeson agrees with The Kauffman Foundation that entrepreneur-led economies are a proven model for developing economic growth.
“Entrepreneurship positively impacts the economic well-being of individuals, families, and nations, and Expeditionary Economics recommends entrepreneurship as the foundation of our international economic development policy and endeavors,” says Mr. Beeson. He notes that Professor Looney’s study on applying Expeditionary Economics to the economy of Pakistan to stimulate economic growth is not only a model for Pakistan, but also a model for other countries facing similar challenges.
“Professor Looney’s study is the beginning of a plan of action to systematically implement entrepreneurial activity in a distressed economy in which the U.S. is committed to providing assistance for various reasons. If the U.S. can be successful in helping create prosperous, self-reliant economies, it is a win-win outcome. I individuals, families and nations prosper and support democratic reforms where the people of a country own their own economy and government, and the U.S. wins by having friends in the international community who support rather than threaten U.S., because they support our values and ideals,” explains Mr. Beeson.
Professor Looney’s paper can be downloaded at expeditionaryeconomics.org., or from this news release.
Read more: http://www.timesunion.com/business/press-releases/article/Wayne-Beeson-Recommends-Expeditionary-Economics-3437021.php
Here are excepts of an interview of Elliot Theorist Mark Galasiewski who's bullish on Pakistan:
To answer your question, there are various ways to make long-term investment decisions. For example, Warren Buffett has shown that picking individual stocks can provide good returns over time. But it's a very labor-intensive and time-consuming process, to research companies thoroughly enough to have the kind of conviction that he does. And his “buy and hold” strategy means that he suffers significant drawdowns in his portfolio at times -- like during the 2007-2009 crash.
Elliott wave analysis gives you the opportunity to make long-term bets with a similar conviction -- but with a fraction of the elbow grease. Instead of pouring over hundreds of quarterly reports and legal documents, you look for Elliott wave patterns in the charts of market indexes. Those patterns reflect investors' collective bias, bullish or bearish. (I won't go into details of why this is so; our Club EWI has tons of free reports explaining the mechanics of the Elliott Wave Principle.)
So, knowing what part of the Elliott wave pattern your market is in, you know how the pattern should progress from there, ideally. And that gives you a probabilistic forecast for the trend. It doesn't work 100% of the time (what does), but our subscribers remember more than one successful forecast we've made using Elliott waves.
For example, on March 23, 2009 -- at the time when almost no one felt bullish -- we issued a special report to our subscribers forecasting a multi-year bull market in Indian stocks. Two weeks later, we identified three more markets in the region -- Pakistan, Sri Lanka, and Indonesia -- that we believed were also likely to enjoy an "Indian Ocean Renaissance."
India, Pakistan, Sri Lanka, Indonesia have all since generated some of the best returns among global stock markets. Without knowledge of the Elliott Wave Principle, it would have been difficult to forecast the boom -- especially given the dismal news events at the time. Do you remember the headlines in early 2009?
The world was engulfed by the global financial crisis, and most people believed the worst was still ahead. The currencies of India, Pakistan, Sri Lanka, and Indonesia had collapsed. Pakistan and India were on the brink of conflict over the Mumbai terrorist attacks of late 2008. A civil war was still raging in Sri Lanka. Who would turn bullish on stock under those "fundamental" conditions? We did, and only because Elliott wave patterns in the price charts of those four markets told us to "buy."
And by the way, the terrible conditions in India, Pakistan and Sri Lanka mostly reversed along with the market rally over the next year.
The Wave Principle is how the market works. Financial markets are non-rational and counter-intuitive. Investing according to conventional assumptions eventually leads to financial ruin, since the market too often does the opposite of what most people expect.
Even thinking contrarily is insufficient, because sometimes it’s necessary to run with the herd. But Elliott wave analysis helps you to determine which psychological stance is most appropriate at any given time. Often, the news at the time would be suggesting you do the opposite.
Here's an ET story on electronic money order launch in Pakistan:
Pakistan Post has launched an Electronic Money Order (EMO) service at seventeen centres in ten districts of the country on Monday. The service has been initiated with an investment of Rs500 million in a centralised software system, without taking the network of competitors doing business in this field into account, The Express Tribune has learnt.
Out of total funds, Pakistan Post has provided Rs100 million to vendor Telconet, who has installed the system and will supervise it, an official said.
Although the service has been initially launched at seventeen locations in 10 different cities, the investment on the system is difficult to justify, the official added. Service charges are comparatively low, as compared to the Easypaisa and UBL Omni services, but the network offered by Pakistan Post cannot beat that offered by its competitors, he maintained.
For a transfer of Rs10,000, Pakistan Post’s charges are Rs160 less than charges received by competitors, the official added. The whole service, he claimed, is based on the very innocent assumption that the customer considers only service charges, while ignoring the time factor and load on the system. “It seems that no cost-benefit analysis has been carried out, and that the lower prices will only translate into lost revenue. The service should have been competitive in all respects: including service charges, availability of service, available timings and the quality of service,” he added.
Easypaisa is currently providing a similar service at 52 branches of the Tameer Bank, 100 walk-in centres, 750 Telenor franchises, and 10,500 merchants countrywide; while UBL Omni is also providing a similar service at more than 600 locations in the country.
“If I have to collect, say, Rs10,000 from the Lahore General Post Office (GPO), I’ll have to travel more than an hour – all the way from Wapda town to Mall road – and spend nearly Rs200 worth of fuel. I would rather prefer to collect this amount at a point nearest to me, saving both time and money,” Muhammad Imran a customer at the Lahore GPO, told The Express Tribune.
Another point to consider is the system itself, and the marketing strategy employed. The Easypaisa system utilises the cell phone network. All Easypaisa merchants and service centres use mobile phones to carry out a transaction, whereas the system available to the Pakistan Post is based on desktop computers and a virtual private network system. This equipment requires uninterrupted power supply, a difficult-to-meet requirement in times of heavy load-shedding.
Here's Pak Observer report on branchless banking growth in Pakistan:
Karachi—Branchless Banking is helping in reaching out to the low income, unbanked people through more than 30,000 access points throughout the country. Nearly 30 million transactions worth Rs.115 billion have been processed during the fourth quarter of the last fiscal year through branchless banking and the average daily transactions have been reported at 315,178 while the total number of branchless banking accounts has increased to 1.7 million. According to the World Bank’s Consultative Group to Assist the Poor (CGAP), Pakistan is the fastest growing branchless banking market in the world.
Addressing the journalists Deputy Governor, State Bank of Pakistan (SBP),Kazi Abdul Muktadi during his visit to Karachi Press Club today.
Expressing his resolve to provide banking services to all segments of the society, he said that with the concerted efforts of all, we will be able to achieve the desired goal of ‘Banking for All’.
Emphasizing the need for an efficient and thriving banking system, he said that the State Bank is providing regulatory environment to financial institutions to enhance financial inclusion in the country. ‘Providing people with access to finance is a challenging task, not just for the central bank but also for all the stakeholders,’ he observed.
State Bank of Pakistan is trying to make the banking services available at the door step of the people, he said and added that promoting access to banking services is the corner stone of SBP’s policy framework. He said the State Bank under its Branch Licencing Policy has made it compulsory for banks to open at least 20% of their new branches in rural and under-served areas.
Abdul Muktadir said the banking industry of Pakistan has tremendous growth potential to deliver lot more than what it is delivering right now. ‘The significance of e-banking and m-commerce cannot be overemphasized because of the fact that both have brought about remarkable changes in the ways people think and do their banking business today,’ he added.
The transformation from traditional to modern ways of banking is taking place at a fast pace. A number of alternate delivery channels for provision of banking services like ATMs, Credit Cards, POS terminals, Internet Banking, Debit Cards already exist in our country to benefit the masses. ‘Currently, 93% of the total bank branches are offering Real-Time Online services,’ he added.
Abdul Muktadir said the SBP would ensure that the high level of banking service standards is maintained for the safety, security and cost effectiveness with adequate levels of protection for consumers’ interests.
The SBP Deputy Governor, who also inaugurated an ATM at Karachi Press Club, pointed out that the availability of ATMs in Pakistan is quite low as there are only 5600 ATMs in the country. At present, there are about one ATM against two bank branches while in developed countries, there are three ATMs against one bank branch. SBP has recently issued policy instructions to all banks which bind them to expand their ATM network in a phased manner so as to achieve a target level of one ATM for each bank branch. ‘Once this target is achieved, we have plans to gradually raise the bar so as to meet the international levels.
Here's an ET story on expansion of branchless mobile banking in Pakistan:
KARACHI: In another strong sign that branchless banking is gaining momentum in Pakistan, Zong and Askari Bank – the latest entrant to join this bandwagon – have partnered to launch a complete branchless banking solution.
The State Bank of Pakistan (SBP), according to sources in Zong, issued branchless banking licence to Zong and Askari Bank last Friday after auditing their pilot project, launched in May this year.
This is the second branchless banking license issued by the SBP this month – the central bank had awarded a mobile financial services licence to Mobilink’s sister concern Waseela Bank.
The product, according to Zong officials, will soon be launched commercially. The branchless banking portfolio includes services like mobile account, money transfers, utility bill payment among others, Zong said in a press statement. Additionally, Zong is going to offer services like salary disbursement, it added.
This will be first of its kind collaboration where a telecom operator and a commercial bank will provide branchless banking services under a relationship where none of the parties has any shares or controlling interest in each other, – the revenue will be shared between the partners.
“Branchless banking is only the beginning of a new banking revolution in the country, we are launching our new branchless banking services to foster financial inclusion of the unbanked population in Pakistan,” Usman Ishaq, executive director (commercial) at Zong said while responding to an email by The Express Tribune.
The project, according to Ishaq, is targeted for the unbanked population of the country, who have no means of availing banking or financial services.
It merits mentioning that only 22% of the country’s population owns a bank account; by contrast, more than 60% Pakistanis have access to mobile phones – the unbanked segment of Pakistan, therefore, provides an opportunity for expansion of branchless banking.
Branchless banking regulation was introduced in Pakistan in April 2008; the central bank has, since then, taken a constructive regulatory approach to encourage investment in this sector – the SBP had issued four branchless banking licences between 2008 and 2011 and the branchless banking just clicked in the country.
Telenor Pakistan, through its subsidiary, Tameer Microfinance Bank launched easypaisa in October 2009 – they processed 23 million transactions amounting to Rs43 billion ($500 million) till the end of July, 2011.
In April 2010, United Bank (UBL) entered sector by launching UBL Omni. It got numerous contracts to disburse payments for public sector organisations and government schemes such as the Benazir Income Support Programme, flood relief programme and the United Nations World Food Programmme.
First MicroFinance Bank and Dubai Islamic Bank Pakistan were among the pilot or small-scale launches – the former had partnered with Post Office in 2008 for loan disbursements.
The fast growing branchless banking sector of the country even got attention from international researchers.
In an October 2011 report – Branchless Banking in Pakistan: A Laboratory for Innovation – Consultative Group to Assist the Poorest (CGAP) mentioned Pakistan as one of the fastest growing markets for branchless banking in the world.
In its report, the CGAP had mentioned Waseela Bank, Askari Bank, Bank Alfalah and MCB Bank as anticipated players to enter the market during next 12 months. While the first two have already got licences, the others are yet to announce their entry in this growing market segment, if they still intend to that is.
Here's ET on China Mobile's plans in Pakistan:
“We are eying the number two position by 2014 at the most,” China Mobile Pakistan CEO Fan Yun Jun, sporting a Pakistan-China friendship badge on the lapel of his coat, tells The Express Tribune at the company’s headquarters in Islamabad.
In Pakistan since 2007, China Mobile’s Zong was the last player to join cellular mobile operators (CMOs) in the country. It is currently ranked fourth based on the size of its customer base with more than 17 million subscribers.
Zong recorded 50% growth in its subscriber base in 2011, and it is likely to achieve similar growth this year, according to the company. Owing to its strategy, which focuses on expanding the company’s subscriber base and cheaper calling rates, Zong has gained close to a million subscribers in the July-September quarter alone.
And while naysayers claim the company cannot survive for long based on its average revenue per user (ARPU) – currently the lowest in the industry – its optimistic CEO does not yet consider it a problem. “We in no hurry to increase our calling rates,” Jun says. “We are enjoying this position – offering the lowest calling rates in the industry.”
The company may not be willing to increase calling rates just yet, but it is venturing into other areas to increase its revenues. In November 2012, Zong launched Timepey (on time), its own brand of mobile banking services, joining other operators already in the industry
Timepey looks set to get a significant initial boost from a contract for the disbursement of Army salaries. The contract is one of the major benefits it stands to gain because of its partnership with Askari Bank, which is owned by the Army Welfare Trust.
A greener company
Meanwhile, Zong is also using a combination of alternate energy sources to adjust its rising fuel costs – one of the major headaches cellular operators are currently grappling with.
“We want to increase revenue, but reduce costs at the same time,” Jun explains. “All CMOs are making efforts to use alternative energy sources [in this regard].”
Zong has provided more than 400 solar panel sets at its sites countrywide, according to Jun. Zong has also launched a pilot project on one of their sites that will run on biogas. Additionally, Jun reveals, the company is using intelligent controllers to reduce energy consumption.
Another technology introduced by the company is the multicarrier power amplifier, which has helped the company increase its energy efficiency by a great deal. “We have introduced this solution here and transferred about 70 to 80 sites on this technology. It saves us between 42-51% in energy consumption,” Jun says.
Possible merger plans?
Zong is currently working on several joint ventures with Warid Telecom. The latter is said to be in talks with all telecom operators for a possible merger. If the two operators go for it, Zong might not have to wait until 2014 to become the industry’s second largest player.
Jun, however, smartly evades the question, “Warid is an important partner and we are doing lots of joint projects. If a merger can benefit both companies, we can think about it.” At the moment, he says the company is more inclined towards infrastructure sharing – which accounts for 50% of their expansion plan.
Here's PR Newswire on digital money in Pakistan:
Pakistan’s financial services industry is currently on the turn, as digital money is spreading on the back of the fast-paced mobile phone penetration. Working side by side with a range of public and private organisations, the State Bank of Pakistan is involved in creating favourable conditions to promote efficient financial inclusion through a branchless banking model, as well as to enhance payment systems for broader use.
New comprehensive viewport “Digital Money in Pakistan 2013” drawn up by Shift Thought provides an in-depth analysis of Pakistan’s digital money market, within the context of the larger Asia-Pacific region and worldwide trends.
The viewport provides an in-depth overview of how digital money services are developing in the country, focusing on what is driving digital money, the kinds of business models and the adoption and maturity of the market. It also goes into the detail of the needs of various market segments, discusses the whole package of services expected by the sector, delves into the regulatory environment, gives a refined understanding of the local payments system and introduces key categories of the players and partnerships that are forming around the delivery of digital money services. The viewport is supplemented with extensive profiles of multiple industry players as well as of the services launched in the Pakistani digital money market.
Pakistan is currently undergoing a transformation in financial services, with the spread of Digital Money aided by the rapid penetration of mobile phones.The Reserve Bank of Pakistan is working with several public and private organisations to promote financial inclusion through a branchless banking model by creating an enabling environment for the development os services in the country.
At ShiftThought we work with organisations around the world to shift the thinking from a focus on Mobile Money to planning for the wider set of initiatives we term as Digital Money. Through this Country Series of viewports we share with you findings from our on-going in-depth analysis of the state of play of Digital Money Initiatives in each country, within the context of the larger region and world-wide trends.
Digital Money services are no longer confined to a single industry, and this breaks down traditional models of competitive analysis. Our approach is designed to helps players to understand the strategies and business models coming from industries other than their own, across a range of products and services and from different parts of the world, to distil best practices for building successful brands that provide innovative access to financial services.
Here's ET on increasing e-banking in Pakistan:
The overall value and volume of e-banking transactions throughout the country increased during the second quarter (October to December 2012) to Rs 7.6 trillion (18.02 per cent)and Rs 79.45 (11.31 per cent) million respectively, the State Bank of Pakistan reported on Wednesday.
State Bank of Pakistan’s Payment Systems report for the second quarter of FY13 released today revealed that the branches of 484 banks in Pakistan were added to the Real-Time Online Branches (RTOB) network during the second quarter of the current fiscal year (FY13) and now 94 percent branches are offering online banking services.
Calculating the overall internet banking services across the country, overall 9,896 branches of banks out of 10,523 are offering the service. During the second quarter, the overall value and volume of internet banking transactions had seen an increase in of 18.82 percent and 14.29 percent in the overall value and volume of internet banking from the first quarter of 2012, respectively.
The Payment Systems infrastructure in the country had also seen an increase because of the installation of 245 new Automated Teller Machines at banks around the country. Today, the number of ATMs across Pakistan has reached a total of 6,232. The report further said that ATM transactions had a major share of 61.12 percent in terms of transaction volume with an average value of Rs9,779 per transaction.
The overall e-banking transactions in value terms was 6.27 percent during the second quarter, increasing the value and volume of ATM transactions by 10.33 percent and 10.68 percent respectively in the second quarter as compared to the first quarter of the current fiscal year.
The report also said that over 20.72 million banking cards were issued in the country by the end of December, 2012, witnessing an increase of 5.33 percent in the second quarter compared to the preceding quarter.
Point of Sale (POS) terminals showed a growth of 6.25 per cent and 5.06 per cent in value and volume respectively as compared to the first quarter of the current fiscal year, with value and volume of transactions standing at Rs22.1 billion and Rs4.5 million, respectively, in the second quarter.
The report also pointed out an increase of large-value payments through Real Time Gross Settlement (RTGS) with 9.46 percent in value and 10.35 percent in volume as compared to the first quarter. The recorded value and volume was Rs42.13 trillion and Rs12.16 billion respectively in the second quarter.
The report also revealed that major portion for the increased number of overall Pakistan Real Time Interbank Settlement Mechanism (PRISM) transactions increased 14.06 percent during the same period, which was contributed by Interbank Funds Transfers (IBFT). Similarly, the value of overall PRISM transactions increased by 14.96 percent due to securities settlement.
A soft revolution of mobile money in Pakistan: A pathway to financial inclusion
Over the past decade, there has been a rapid expansion of mobile money (m-money) networks in developing countries. These are largely intended to help financial services reach unbanked populations. This innovation has been taken up by cellular mobile companies in Pakistan, in partnership with domestic financial institutions, and thus creating some innovative business models for the use of m-money. While these innovations are a positive step forward for greater financial inclusion in Pakistan, a national strategy is essential to facilitate targeted and coordinated efforts between regulators and the private sector.
The challenge of high financial exclusion
Despite comprehensive financial sector reforms in Pakistan, progress on financial inclusion has been slow. In 2011, only 10% of Pakistan’s adult population had accounts at formal financial institutions (Figure 1). In comparison, 68.5% of the adult population in Sri Lanka had bank accounts, whereas this figure is 39.6% in Bangladesh and 35.2% in India.
Pakistan’s m-money infrastructure has expanded rapidly since the launch of the first domestic initiative in October 2009. This expansion has been promoted by a liberal financial and telecommunications regulatory framework, and active private sector participation. Four out of five cellular mobile companies currently operating in Pakistan have launched m-money systems in partnership with financial institutions. The m-money market volume has reached 153 million annual transactions worth US$ 6.2 billion.
There are two ways through which m-money services are provided in Pakistan. More than 95% of m-money transactions are carried out through mobile banking (m-banking) agents, and the rest are processed directly through customers’ mobile-wallet (m-wallet) accounts, using mobile phones. M-banking agents (retail points) provide the basic infrastructure for Pakistan’s m-money services, whereas customers’ m-wallet accounts currently have a limited role in the m-money services market.
In Pakistan, m-money services can improve access to financial services for the unbanked population, which is something which traditional banking channels have not managed to do. The network of 93,864 m-banking agents against only 10,250 commercial bank branches in the country provides a perspective as to the reach m-money has on the un-banked and poor.
The current high rate of dependence on agents to complete mobile transactions is typical in the initial adoption of m-banking. Moving forward, the importance of m-wallet accounts cannot be neglected. Many financial services including savings, insurance and micro-credit can be delivered through m-wallet accounts, which provide a store of value. As of June 2013, there were only 2.6 million m-wallet accounts, which is not large enough to reduce the high level of financial exclusion in Pakistan. Three new players that started operations in 2013 are relying solely on agent-based m-money services, while neglecting the potential of m-wallet accounts.
Less money moves through wireless transfers in India than in either Pakistan or Bangladesh, both of which have smaller populations.
As we report this week, in much of the developing world, mobile money is evolving. Initially just a means of making payments, it’s now becoming a platform for an entire financial-services industry. But one of the world’s biggest and poorest countries has remained immune to the attractions of mobile money. Despite the potential benefits, “the uptake has been limited,” says Graham Wright of MicroSave, a financial-inclusion organisation working in India. “And because of those challenges, the mobile operators are unsure about how much to invest in this business.”
That doesn’t mean there isn’t opportunity. India has 15 mobile money providers, second only to Nigeria. Of the 904 million mobile subscriptions in India, 371 million (pdf) are in rural areas. Analysts think that mobile money transfers in India could be worth $350 billion annually (paywall) by next year. Yet the state of the industry remains small: Less money moves through wireless transfers in India than in either Pakistan or Bangladesh, both of which have smaller, poorer populations.
So why, despite boasting 15 mobile money services, does India lag so far behind other developing nations?
The simple answer is regulation. India requires mobile operators to work with banks to provide the services. Mobile networks would like instead to have their own agents who can cash out the digital money into hard currency. Much of the infrastructure is already in place, because there are so many locations where customers can top up on airtime. But the mobile operators aren’t allowed to use those sales outlets as financial agents.
Yet the banks aren’t filling the gap. They have failed to serve rural areas, especially thinly-populated ones. Nor are they particularly keen on sending agents to operate in small villages. A report (pdf, p.31) on financial services for the poor, commissioned by the Reserve Bank of India, called the situation in both rural and urban India “grim,” with 64% of Indians lacking bank accounts. “The business case for providing mobile money services to the unbanked in the most remote rural areas of India is not appealing to banks,” reports the GSM Association (pdf), a trade body of mobile operators.
#Pakistan to have 100 million bank accounts by 2025. #financialinclusion #banking
“Thanks to the concept of the one-minute bank account, the industry is opening close to a million accounts a month,” he said.
There were a total of 41.7 million bank accounts in Pakistan at the end of last fiscal year, according to the State Bank of Pakistan (SBP). More than 31.3 million accounts, or 75% of all bank accounts, belonged to the personal accounts category.
The SBP has recently modified the regulatory framework to quicken the bank account-opening process with the help of the national database authority.
“NADRA is the real-time online depository of the biometric impressions of close to 100 million people,” Hussain said, adding that utilising its database had so far resulted in eight million one-minute accounts.
The industry expects 50 million accounts by 2020 and 100 million accounts by 2025. Assuming the average balance of Rs1,000 in these accounts, Hussain said these accounts will bring as much as Rs100 billion back into the banking system.
It will also make access to credit possible for people and small businesses that are currently unable to borrow from commercial banks, he noted. “A bank account is the centre of gravity for financial inclusion,” he said.
Speaking on the occasion, Lucky Cement CEO Muhammad Ali Tabba said his group had plans to invest $1.8 billion in the next four years. “The economy and the security situation are on an improving trajectory. The feel-good factor is prevailing,” he said.
Urging people to “believe in Pakistan,” Tabba said the China-Pakistan Economic Corridor (CPEC) will be a game-changer for the economy. “I think $46 billion investment will materialise and transform Pakistan into a major economic hub.”
Addressing the audience, Planning and Development Minister Ahsan Iqbal said Pakistan has undergone a huge change since 2013. “The world now considers Pakistan an important player in the region, as Chinese investments would integrate Pakistan with Central Asian countries.”
The CPEC will bring development and prosperity in the country with investment of up to $5 billion in infrastructure and networks of roads and bridges, he said.
#Pakistan is upbeat on #Islamic branchless banking- http://www.khaleejtimes.com/business/banking-finance/pakistan-is-upbeat-on-islamic-banking …
Upbeat on shariah-compliant modes, Pakistan has just launched Islamic branchless banking claiming it to be "the first" - globally.
At the same time, State Bank of Pakistan (SBP), the central bank, just unveiled vast opportunities for foreign and domestic investors to come into the fold of all types of conventional and Islamic banking to invest and earn big dividends.
The first to take up the Branchless Islamic Banking (BIB) are Kuwait-based Meezan Bank and Ufone, a subsidiary of Pakistan Telecommunications Corporation (PTCL), partly owned by etisalat. The new ventures will carry the brand name of "Meezan-Upaisa," and it is the only Shariah-based branchless banking service.
The other cellphone-based branchless conventional banking in the country are Mobicash Waseela Bank operated by Mobilink, EasyPaisa-Tameer launched in cooperation with Norway-based Telenor, Ypaisa-U bank of Ufone and Timepey-Askari Bank.
While launching the new BIB customer service across Pakistan, SBP governor Ashraf Mahmood Wathra said this is the first product of its kind, not only in Pakistan, but in the whole world. "We have granted the permission to launch this unique service in order to facilitate 95 per cent of Pakistanis who will like to deal only with Islamic banking services, and have remained away from the current conventional banking services, because of their Islamic faith," Wathra said.
SBP, which recently conducted a survey 'Knowledge, attitude and practices of Islamic banking in Pakistan', said there is an overwhelming, and evenly distributed, demand in the urban and rural areas of the country for Islamic banking. The demand for Islamic banking is as high as 95 per cent among the households at the retail level. "Demand stands at 73 per cent among the businessmen," according to the SBP survey, which is based on 9,000 households nationwide and includes banked and non-banked customers, and 1,000 corporates. Meezan Bank and Ufone took a full year to develop the BIB model, which has now been launched.
"With this new collaboration, we aim to capitalise on the strength of both the parties - Meezan Bank's strength in Islamic banking and Upaisa's geographic footprint in facilitating customers, making it a win-win situation for all. This is because Upaisa is at the forefront in providing branchless banking services, and its collaboration at various levels and Meezan Bank holding over 50 per cent of the Islamic banking share in Pakistan," Ufone President Abdul Aziz said.
Asher Yaqub Khan, chief commercial officer of Ufone, said Islamic branchless banking will accelerate the goal of financial inclusion of the economy to a great extent.
President and chief executive of Meezan Bank Irfan Siddiqui said his bank has played a vital role in expanding access to Islamic financial services in Pakistan. "This initiative is poised to accelerate financial inclusion by adding convenience and greater reliability, deepening the role of Ufone through enhancing the value it provides to its customers and that of Meezan Bank in expanding the reach of Islamic financial services to every citizen in the country."
The two partners - Meezan Bank and Ufone - hope that their partnership will expand Islamic system footprint to its maximum potential customers and facilitate them to avail branchless banking services with utmost ease and convenience under the Islamic system. This will be the fist milestone in the ambit of Islamic branchless banking.
"Our partnership will provide the service at 10,000 points of service across 500 cities, districts and villages. BIB will not only promote micro-financing but also finance for agriculture and small businessmen. It will also encourage savings by the general public, based on profit and loss model."
The State Bank of Pakistan has pointed out a number of weaknesses in economic policies, including energy strategy, and has asked the government to address the weaknesses.
Pakistan's economy grew 4.2 per cent in fiscal 2015, but investors remain wary of systemic weaknesses, the central bank said in its annual report, urging the government to adopt clearer, more consistent policies on industry and trade. Growth for the financial year to June 2015 fell short of a target of 5.1 per cent, it was slightly better than the 4.0 percent achieved in 2014, the bank said.
According to the report, the economy needs to expand at least six per cent each year to absorb new entrants into the work force from Pakistan's growing population of 190 million.
“Despite a sharp reduction in interest rates and an incre¬ase in public investments, private investments did not recover. Investors' confidence demands the presence of a predictable macroeconomic environment with well-coordinated and consistent long-term industrial and trade policies,” the report said. Another factor daunting do¬me¬stic and foreign investors is the state of domestic energy supplies. Businesses have suffered over the past few years because of frequent power and gas outages.
Although the situation improved slightly in a couple of years, several industries like leather, paper and glass, are still not able to produce at optimal capacities.
“At its core, this shortage of energy also reflects the lack of a coherent policy,” said the report. The absence of an export-oriented growth strategy or a rational import-substitution focus, over the years has resulted in recurring stress on the external account, which did not allow the economy to move towards a high growth trajectory, said the report.
#Pakistan (9% male, 2% female) Leads South Asia in #MobileMoney. #India (3% m, 1% f), #Bangladesh (3% m, 2% f) http://blogs.worldbank.org/opendata/chart-pakistan-leads-south-asia-mobile-money …
In 2014, an average of 3% of people in South Asia used a mobile phone to send or receive money. While there are still gaps between how often men and women use these services, Pakistan leads the region with 9% of men and 2% of women moving money on their mobiles. You can find more data on financial inclusion in the Global Findex Database
#Pakistan formally launches National Financial Inclusion Strategy. #financialinclusion
Pakistan on Tuesday formally launched its National Financial Inclusion Strategy (NFIS) in the presence of World Bank President Jim Yong Kim.
The United Nations Secretary-General's Special Advocate for Inclusive Finance for Development (UNSGSA), Queen Maxima of the Netherlands and Finance Minister Ishaq Dar was present on the occasion.
Pakistan has developed and launched its National Financial Inclusion Strategy (NFIS) last year and its objective was to enhance formal financial access to 50 percent of the adult population by 2020.
Speaking on the occasion, the World Bank President Jim Yong Kim, said that Pakistan has a great opportunity to become more ambitious in reforming its economy so that more people are lifted out of poverty more quickly and prosperity is more widely shared among its people.
He noted that the government had stabilized the economy over three tough years, Kim said he had discussed in meetings with the prime minister and finance minister about the importance of pressing forward with reforms that would unlock the country's potential.
"Now is the moment for Pakistan to step up to a higher level of growth and opportunity for all its people," said Kim.
"The National Financial Inclusion Strategy has come at a particularly opportune moment as new technology and the rapid expansion of branchless banking offer unprecedented opportunities to transform financial inclusion in Pakistan.
Pakistan is now leading the way in South Asia when it comes to digital finance and branchless banking", said Kim.
Kim also participated in a panel discussion on "Managing Displaced Populations" and learnt how the country managed a large Afghan refugee population.
"There is much the world can learn from Pakistan, which has for decades hosted refugees from other countries or had to cope with temporarily displaced people within its own borders," said Kim.
"We are committed to support the Government of Pakistan in repatriating the crisis affected displaced people through the newly effective cash transfer project."
Minister for Finance Ishaq Dar speaking on the occasion said that access to better financial incclusion was key higher economic growth and sustainable economic development.
He added that the government of Prime Minister Nawaz Sharif was committed to develop economy and had initiated National Financial Inclusion Strategy (NFIS) last year.
He said that under the NFIS government was committed to enhance formal financial access to 50 percent of the adult population by year 2020.
He also vowed to reduce poverty by enhancing financial access to 50 percent of the adult population by 2020.
He also underlined the rising growth and declining inflation during the tenure of current government under the leadership of Prime Minister Nawaz Sharif together with significant expansion in coverage of Benazir Income Support Programme (BISP) cash transfers, which would be rising from Rs. 40 billion in 2012-13 to Rs. 105 billion in 2015-16, increasing the coverage from 3.7 million to 5.4 million families and significantly enhanced income support annual stipend from Rs 12000 to Rs 18000 during this period.
Finance Minister also said that government was taking steps for alleviation of poverty through Khushhali Bank and Pakistan Poverty Alleviation Fund (PPAF).
The Finance Minister said, "Government's development policy agenda was based on the principle of inclusive economic growth so that the benefits are shared across all segments of the society".
#Pakistan Has Chance to Boost #Economy, World Bank President Says in #Islamabad. #financialinclusion http://goo.gl/ItqjSx via @WorldBank
Pakistan has a great opportunity to become more ambitious in reforming its economy so that more people are lifted out of poverty more quickly and prosperity is more widely shared among its people, said World Bank Group (WBG) President Jim Yong Kim.
Noting that the government had stabilized the economy over three tough years, Kim said he had discussed in meetings with the prime minister and finance minister about the importance of pressing forward with reforms that would unlock the country’s potential. As part of the World Bank’s continued support to the country, there was discussion of a Development Policy Credit to promote economic reforms.
“Now is the moment for Pakistan to step up to a higher level of growth and opportunity for all its people,” said Kim. “In my meetings with the prime minister and finance minister, we discussed going to a higher level of ambition for reforms for the economy. These could include strengthening the role of the private sector for job creation, accelerating energy reforms, making improvements at the community level for health and education, and ensuring that anti-poverty measures are effective at reaching poor people.”
Kim made his comments on the first day of his two-day visit to Pakistan after meetings in Islamabad with the government leadership, including economic ministers and secretaries from provincial and federal governments.
Kim participated in a State Bank of Pakistan launch event for WBG support to Pakistan’s financial inclusion reform agenda, “Pakistan’s Path towards Universal Financial Access.” “The National Financial Inclusion Strategy has come at a particularly opportune moment as new technology and the rapid expansion of branchless banking offer unprecedented opportunities to transform financial inclusion in Pakistan. Pakistan is now leading the way in South Asia when it comes to digital finance and branchless banking”, said Kim.
The UN Secretary General’s Special Advocate for Inclusive Finance for Development, Queen Máxima of the Netherlands, and Finance Minister Ishaq Dar also participated in the event.
Kim also participated in a panel discussion on “Managing Displaced Populations” and learnt how the country managed a large Afghan refugee population. The event was co-organized by the World Bank, the Economic Affairs Division and UNHCR, in the context of the continuing global refugee crisis.
“There is much the world can learn from Pakistan, which has for decades hosted refugees from other countries or had to cope with temporarily displaced people within its own borders,” said Kim. “We are committed to support the Government of Pakistan in repatriating the crisis affected displaced people through the newly effective cash transfer project.”
Later in the day, he met with the provincial leadership of Khyber Pakhtunkhwa and Punjab and learned about province-level reform efforts and development projects under implementation and preparation with World Bank Group support. He underlined the importance of the role of the provincial governments in the effective implementation of reforms.
Kim later plans to meet private sector representatives, students, and the provincial leadership of Sindh.
The World Bank Group in Pakistan:
The World Bank’s program in Pakistan is governed by its Country Partnership Strategy (CPS) agreed with the government. The World Bank Pakistan portfolio has 26 investment lending projects under implementation with a total net commitment of $4.99 billion. To date, we have committed over $5.6 billion in Pakistan, including $1.2 billion during the 2015 fiscal year. IFC’s advisory services program in Pakistan is one of its largest in the region, with 13 active projects and a funding commitment of over $20 million
#Pakistan’s rising #mobile wallet adoption. #financialinclusion #mobilemoney http://www.pakistantoday.com.pk/2016/09/18/business/pakistans-rising-mobile-wallet-adoption/ … via @epakistantoday
Mobile wallets (Such as Telenor EasyPaisa, Mobilink Jazz Cash etc) are often heralded as an innovative source of financial inclusion for the unbanked. And rightly so, mobile wallet accounts bypass the necessity of building and staffing a bank branch, and it also relieves its account holder from making the effort of going to a bank branch. Similarly, at least for Pakistan, its registration requirements makes it an easier option than a regular bank account.
Pakistan’s Financial Inclusion strategy for2015 recognises the importance of mobile money in expanding “digital transactional accounts”, which the strategy recognises as a key driver. In this regard, the recent upsurge in the number of mobile wallet registration should be encouraging. Just to put it in perspective; as perdata from the State Bank of Pakistan, at the end of Jul-Sept 2012, the number of wallet accounts was at approximately 1.8 million, however by Jul-Sept 2015 the same has risen to 13 million.
It is definitely a heartening increase especially when seen from a financial inclusion angle. But it is important to consider the demographics of these new wallet owners, are they predominantly from the banked segment or the unbanked one? A relevant source for answering these questions is the Financial Inclusion Insights (FII) survey 2015 for Pakistan. The FII 2015 is a nationally representative survey with a sample of 6000 individuals. Besides covering other aspects of Pakistan financial inclusion landscape, the FII also provides interesting insights into the probable demographic composition of Pakistan’s wallet accounts.
To begin with, the FII 2015 predicts that most wallet owners already had bank accounts, more specifically only44% of mobile wallet owners did not have bank accounts. When seen as a proportion of their base samples, wallet owners with bank accounts constituted 8% of bank account holders, however, unbanked wallet owners were only 0.61% of the unbanked sample.
So who are these unbanked wallet owners? And how are they different from the unbanked who did not opt for a wallet account?In the following paragraphs will go over a few significant differences between unbanked mobile wallet owners, and the unbanked who do not have a wallet account.
Awareness about mobile money seems to be low among this group as 45% of unbanked with no wallet accounts were simply unaware about any of mobile money brands out there. It won’t be wrong to assume that almost half of the unbanked with no wallet account don’t even know about the existence of a mobile money option.
Gender differences were also apparent, as FII 2015 predicts 77% of unbanked wallet owners to be male, and only 22% to be female. This might be because of cultural constraints in Pakistan that discourage
Mobile wallets (Such as Telenor EasyPaisa, Mobilink Jazz Cash etc) are often heralded as an innovative source of financial inclusion for the unbanked. And rightly so, mobile wallet accounts bypass the necessity of building and staffing a bank branch, and it also relieves its account holder from making the effort of going to a bank branch. Similarly, at least for Pakistan, its registration requirements makes it an easier option than a regular bank account.
Pakistan’s Financial Inclusion strategy for2015 recognizes the importance of mobile money in expanding “digital transactional accounts”, which the strategy recognizes as a key driver. In this regard, the recent upsurge in the number of mobile wallet registration should be encouraging. Just to put it in perspective; as perdata from the State Bank of Pakistan,at the end of Jul-Sept 2012, the number of wallet accounts was at approximately 1.8 million, however by Jul-Sept 2015 the same has risen to 13 million.
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