Microfinance Raising Financial Inclusion in Pakistan
Pakistan ranks first in Asia and third in the world in Economist Intelligence Unit's overall microfinance business environment rankings for 2011. Among other Asian nations, only the Philippines at #6 made the top ten list.
On a scale of 0-100, Pakistan scores 62.8, just behind top-ranked Peru's 67.8 and second-ranked Bolivia's 64.7 in overall global rankings of 55 countries. Among nations in South Asia region, India ranks 27 with a score of 43.1 and Bangladesh ranks 43 with a score of 30.9. Sri Lanka is at #48 with a score of 27.4 followed by Nepal at 51 scoring 26.1.
Among various categories, Pakistan ranks #1 in regulatory framework and practices and #5 in supporting institutional framework.
Here's an excerpt on Asia from the EIU report titled "Global microscope on the microfinance business environment":
"Pakistan and the Philippines again top the regional rankings for East and South Asia. These countries both finished in the top ten globally, signifying strong environments for microfinance. Indeed, Pakistan and the Philippines came first and second globally, respectively, in the Regulatory Framework and Practices category, suggesting strong regulatory regimes and good prospects for MFIs to enter the sector and perform effectively. The Philippines, for example, has had a strong enabling environment for microfinance for more than a decade. Cambodia is third best in Asia and makes it into the top 25% globally. India comes next, but fell precipitously after the crisis that struck the sector last year. Mongolia finished fourth in Asia, but was the region’s most-improved performer."
Recently, Pakistan's central bank governor Haris Anwar said that large segments the nation's population have no bank accounts and many do not understand why it puts them at a disadvantage when it comes to their personal financial management. According to Pakistan Access to Finance Survey (A2FS), only 12 percent of the population has access to formal financial services. Of the remaining 88 percent, only 32 percent are informally served and 56 percent are completely excluded, Anwar said, adding that according to the A2FS analysis, about 40 percent of the financially excluded population reported lack of understanding of financial products as the main reason for financial exclusion.
It has long been recognized by poverty alleviation experts that pursuing policies for increasing financial inclusion, such as encouraging microfinance, are absolutely essential to lift tens of millions of people out of poverty in Pakistan, where 50% of the workforce is made up of low-end self-employed. Other efforts toward bringing financial services to the poor and lower middle class in Pakistan include financial literacy initiatives and growth of branchless mobile banking in city slums and rural areas of the country.
Pakistan’s first-ever National Financial Literacy Program was launched earlier this year with the support and collaboration of Asian Development Bank (ADB), Pakistan Banks’ Association (PBA), Pakistan Microfinance Network (PMN), Pakistan Poverty Alleviation Fund (PPAF) and BearingPoint consultants.
The growth of branchless banking in Pakistan is now being held up a success story at international fora. Within a span of just two years, there are now almost 18,000 branchless banking outlets surpassing the 10,000 conventional bank branches, according to Governor Anwar. UBL Omni’s branchless banking service launched in April 2010 by United Bank has won several contracts to disburse payments for nongovernment organizations and government schemes to help those affected by floods. UBL reports that at the end of June it had 5,000 agents disbursing payments to 2 million recipients under these programs. UBL Omni has also started accepting loan repayments for microfinance institutions (MFIs) and providing cash management facilities for businesses.
According to a recent World Bank report titled "More and Better Jobs in South Asia" which shows that 63% of Pakistan's workforce is self-employed, including 13% high-end self-employed. Salaried and daily wage earners make up only 37% of the workforce. Access to money is necessary for many of these entrepreneurs to succeed in realizing their dreams.
The history of microfinance in Pakistan started with the launch of Orangi Pilot Project (OPP) in Kutchi Abadies (shanty towns) of Karachi in early 1980’s, according to a paper published by Abdul Qayyum and Munir Ahmed. In the late 1960s, prior to OPP, a few NGOs in the rural areas of Pakistan began to experiment with microcredit by offering subsidized loans. However, they mostly failed to reach the poor due to abuse and corruption. Now there are dozens of Micro Finance Institutions working in Pakistan. The MFIs in Pakistan can be divided into different groups based on their uniqueness that separates them from other financial institutions and makes them similar in terms of the way they function.
The first group consists of financial institutions with microfinance as a separate product line. The share of microfinance related activities of these institutions is up to 10 percent. This group includes Orix Leasing and the Bank of Khyber –both are profit making organizations and consider microfinance as a separate product line.
The second group refers to the specialized MFI’s, which includes two microfinance banks - The Khushhali Bank and First Microfinance Bank Limited (FMBL) - and two NGOs - KASHF Foundation and Asasah. All these institutions completely focus on provision of financial services and also have commercial focus as well.
Third category MFIs related to activities of the Rural Support Programs which deals with integrated Rural Development Programs with microfinance as one of its activities. These organizations are National Rural Support Programs (NRSP), Punjab Rural Support Programs (PRSP) and Sarhad Rural Support Programs (SRSP). The last group consists of private NGOs. These NGOs are basically integrated development organizations with microfinance as one of their activities. These include Orangi Pilot Project, Sungi Foundation, Taraqee Foundation, Development Action for Mobilization and Emancipation (TRDP), Sindh Agricultural & Forestry Workers Coordinating Organization (SAFWCO) and Development Action for Mobilization and Emancipation (DAMEN), among others.
Khushhali Bank was established in August 2000 as part of the Government of the Islamic Republic of Pakistan's Poverty Reduction Strategy. The Pakistan Microfinance Sector Development Program (MSDP) was developed with the technical assistance and funding of the Asian Development Bank, which provided a US$150 million loan to the government of Pakistan, US$70 million being used for micro-loans provided by KB. Headquartered in Islamabad, KB operates under the central bank's supervision (State Bank of Pakistan) with several commercial banks operating as its primary shareholders.
To broaden access, there are now efforts underway to offer Shariah-compliant microfinance products to those who are reluctant to participate in interest-based banking. Farz Foundation is among the first to do so. It is engaged in Islamic micro-financing for livestock and agriculture among the rural poor.
Pakistan has a long way to go to achieve financial inclusion for the majority of its population. The current efforts on increasing access to money for the poor are a good start on a long journey that may take decades to complete. My readers who are interested in helping the poor in Pakistan by offering small loans of $25 or more have a choice of many websites to do so, including kiva.org which I have been using. The loans to Pakistani recipients are administered through Asasah, a Kiva partner in the country.
Related Link:
Haq's Musings
Pakistan's Financial Services Sector
Fighting Poverty Through Microfinance
IBA on Entrepreneurship in Pakistan
Floods Dampen Enthusiasm on Pakistan Independence Day
On a scale of 0-100, Pakistan scores 62.8, just behind top-ranked Peru's 67.8 and second-ranked Bolivia's 64.7 in overall global rankings of 55 countries. Among nations in South Asia region, India ranks 27 with a score of 43.1 and Bangladesh ranks 43 with a score of 30.9. Sri Lanka is at #48 with a score of 27.4 followed by Nepal at 51 scoring 26.1.
Among various categories, Pakistan ranks #1 in regulatory framework and practices and #5 in supporting institutional framework.
Here's an excerpt on Asia from the EIU report titled "Global microscope on the microfinance business environment":
"Pakistan and the Philippines again top the regional rankings for East and South Asia. These countries both finished in the top ten globally, signifying strong environments for microfinance. Indeed, Pakistan and the Philippines came first and second globally, respectively, in the Regulatory Framework and Practices category, suggesting strong regulatory regimes and good prospects for MFIs to enter the sector and perform effectively. The Philippines, for example, has had a strong enabling environment for microfinance for more than a decade. Cambodia is third best in Asia and makes it into the top 25% globally. India comes next, but fell precipitously after the crisis that struck the sector last year. Mongolia finished fourth in Asia, but was the region’s most-improved performer."
Recently, Pakistan's central bank governor Haris Anwar said that large segments the nation's population have no bank accounts and many do not understand why it puts them at a disadvantage when it comes to their personal financial management. According to Pakistan Access to Finance Survey (A2FS), only 12 percent of the population has access to formal financial services. Of the remaining 88 percent, only 32 percent are informally served and 56 percent are completely excluded, Anwar said, adding that according to the A2FS analysis, about 40 percent of the financially excluded population reported lack of understanding of financial products as the main reason for financial exclusion.
It has long been recognized by poverty alleviation experts that pursuing policies for increasing financial inclusion, such as encouraging microfinance, are absolutely essential to lift tens of millions of people out of poverty in Pakistan, where 50% of the workforce is made up of low-end self-employed. Other efforts toward bringing financial services to the poor and lower middle class in Pakistan include financial literacy initiatives and growth of branchless mobile banking in city slums and rural areas of the country.
Pakistan’s first-ever National Financial Literacy Program was launched earlier this year with the support and collaboration of Asian Development Bank (ADB), Pakistan Banks’ Association (PBA), Pakistan Microfinance Network (PMN), Pakistan Poverty Alleviation Fund (PPAF) and BearingPoint consultants.
The growth of branchless banking in Pakistan is now being held up a success story at international fora. Within a span of just two years, there are now almost 18,000 branchless banking outlets surpassing the 10,000 conventional bank branches, according to Governor Anwar. UBL Omni’s branchless banking service launched in April 2010 by United Bank has won several contracts to disburse payments for nongovernment organizations and government schemes to help those affected by floods. UBL reports that at the end of June it had 5,000 agents disbursing payments to 2 million recipients under these programs. UBL Omni has also started accepting loan repayments for microfinance institutions (MFIs) and providing cash management facilities for businesses.
According to a recent World Bank report titled "More and Better Jobs in South Asia" which shows that 63% of Pakistan's workforce is self-employed, including 13% high-end self-employed. Salaried and daily wage earners make up only 37% of the workforce. Access to money is necessary for many of these entrepreneurs to succeed in realizing their dreams.
The history of microfinance in Pakistan started with the launch of Orangi Pilot Project (OPP) in Kutchi Abadies (shanty towns) of Karachi in early 1980’s, according to a paper published by Abdul Qayyum and Munir Ahmed. In the late 1960s, prior to OPP, a few NGOs in the rural areas of Pakistan began to experiment with microcredit by offering subsidized loans. However, they mostly failed to reach the poor due to abuse and corruption. Now there are dozens of Micro Finance Institutions working in Pakistan. The MFIs in Pakistan can be divided into different groups based on their uniqueness that separates them from other financial institutions and makes them similar in terms of the way they function.
The first group consists of financial institutions with microfinance as a separate product line. The share of microfinance related activities of these institutions is up to 10 percent. This group includes Orix Leasing and the Bank of Khyber –both are profit making organizations and consider microfinance as a separate product line.
The second group refers to the specialized MFI’s, which includes two microfinance banks - The Khushhali Bank and First Microfinance Bank Limited (FMBL) - and two NGOs - KASHF Foundation and Asasah. All these institutions completely focus on provision of financial services and also have commercial focus as well.
Third category MFIs related to activities of the Rural Support Programs which deals with integrated Rural Development Programs with microfinance as one of its activities. These organizations are National Rural Support Programs (NRSP), Punjab Rural Support Programs (PRSP) and Sarhad Rural Support Programs (SRSP). The last group consists of private NGOs. These NGOs are basically integrated development organizations with microfinance as one of their activities. These include Orangi Pilot Project, Sungi Foundation, Taraqee Foundation, Development Action for Mobilization and Emancipation (TRDP), Sindh Agricultural & Forestry Workers Coordinating Organization (SAFWCO) and Development Action for Mobilization and Emancipation (DAMEN), among others.
Khushhali Bank was established in August 2000 as part of the Government of the Islamic Republic of Pakistan's Poverty Reduction Strategy. The Pakistan Microfinance Sector Development Program (MSDP) was developed with the technical assistance and funding of the Asian Development Bank, which provided a US$150 million loan to the government of Pakistan, US$70 million being used for micro-loans provided by KB. Headquartered in Islamabad, KB operates under the central bank's supervision (State Bank of Pakistan) with several commercial banks operating as its primary shareholders.
To broaden access, there are now efforts underway to offer Shariah-compliant microfinance products to those who are reluctant to participate in interest-based banking. Farz Foundation is among the first to do so. It is engaged in Islamic micro-financing for livestock and agriculture among the rural poor.
Pakistan has a long way to go to achieve financial inclusion for the majority of its population. The current efforts on increasing access to money for the poor are a good start on a long journey that may take decades to complete. My readers who are interested in helping the poor in Pakistan by offering small loans of $25 or more have a choice of many websites to do so, including kiva.org which I have been using. The loans to Pakistani recipients are administered through Asasah, a Kiva partner in the country.
Related Link:
Haq's Musings
Pakistan's Financial Services Sector
Fighting Poverty Through Microfinance
IBA on Entrepreneurship in Pakistan
Floods Dampen Enthusiasm on Pakistan Independence Day
Comments
Blame it on either the absence of institutional support or a lack of eagerness on the part of the academia, the reality remains that business students in Pakistan had so far no textbook on banking and finance that described the complex relationship between the financial system and economic development in Pakistani context.
It was this academic vacuum that made Dr Shakil Faruqi write a two-volume book titled “Financial System and Economic Development – Pakistan,” which was launched at the Institute of Business Administration (IBA) on Monday in a ceremony chaired by IBA Dean and Director Dr Ishrat Husain and attended by IBA faculty members, students, economists and many former and current State Bank officials.
Formerly associated with the World Bank, Dr Faruqi has a PhD in economics from the University of Pennsylvania. He now teaches at the Lahore School of Economics (LSE), which is also the publisher of the two-part book.
Speaking on the occasion, former head of World Bank’s Learning Centre Tariq Hussain termed the book unique because it explained the theory of banking and finance by linking it to its actual application in the economy of Pakistan.
He said the chapters on Islamic finance discussed the issue in a purely academic manner. “It says what Islamic finance is and what it’s not. Also, it does this in an academic, rather than argumentative, way.”
Addressing the ceremony, Dr Faruqi said his students knew about the US Federal Reserve more than they knew about the State Bank of Pakistan (SBP) because the textbooks they used were by American authors. Saying that his students often complained finance was a dry subject, Dr Faruqi stated, jokingly, that his task was to make it as interesting as a Bollywood movie.
The first volume of the book has chapters on the financial system, interest rate, financial savings, credit system, Islamic banking, monetary management, etc. The second volume has chapters on the financial market, securities market, assets, yields, returns, trading in derivatives, capital market, long-term debt market, stock market, portfolio financing, etc.
The first and second volumes of the book cost Rs1,900 and Rs1,600, respectively.
http://tribune.com.pk/story/339368/vacuum-filled-textbook-on-banking-and-finance-launched/
Pakistan’s central bank aims to spur lending to small companies, farming and housing in the next three years to boost growth in an economy where government borrowing has curbed credit and kept interest rates elevated.
“These three areas have to be stimulated and will become engines of growth,” Governor Yaseen Anwar, 60, said in an interview at the State Bank of Pakistan in Karachi on March 2. He forecast the economy will expand by 3 percent to 4 percent in the year ending June.
Anwar has kept the benchmark rate at 12 percent since he was officially made governor in October, refraining from adding to two reductions in 2011 as the nation grapples with the fastest inflation in Asia after Vietnam. He said government borrowing is impeding credit, as insufficient tax collections force Prime Minister Yousuf Raza Gilani’s administration to turn to central bank funding to finance flood rehabilitation and a war against militants in the northwest.
“The State Bank cannot do much in isolation without the government taking some very basic corrective measures,” said Nasim Beg, executive vice chairman of Arif Habib Investments Ltd. in Karachi, which oversees 35 billion rupees ($385 million) in stocks and bonds. “The government will be likely to go for aggressive populist spending early in this election year and worry about meeting revenue targets later -- more pressures for the governor.”
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Anwar, who worked at Merrill Lynch & Co. and Bank of America Corp. in his 33-year career before joining the State Bank, cited the government’s commitment to “zero borrowings” from the central bank as one of the reasons for reducing rates in July.
“We need attention on the revenue side in terms of tax reform,” Anwar said, adding he thinks the government may meet its collection target of 1.95 trillion rupees in the year ending June 30. The ratio of tax to gross domestic product, which the finance ministry estimates is 9 percent, “has to go up into the teens,” he said.
Only one in 10 Pakistanis pay taxes, limiting the government’s ability to fund a budget deficit that the International Monetary Fund estimates may widen to as much as 7 percent of gross domestic product this year.-----------
http://www.bloomberg.com/news/2012-03-04/pakistan-s-anwar-plans-lending-boost-to-bolster-economic-growth.html
Sharing statistics of SBP, Anwar said value of branchless banking transactions reached Rs79,410 million during the last quarter. Total number of branchless banking accounts have increased to 929,184, he said, while branchless banking deposits have grown to Rs503 million.
SBP introduced branchless banking regulations in 2008. He further said around 80 million branchless banking transactions of Rs300 billion have been executed in Pakistan. “I am expecting a surge in the number of access points to over 50,000 very soon,” he said. Total volume (number) of transactions has jumped to 20.6 million during the October to December 2011, Anwar said. The average number daily transactions has increased to 228,855, he added.
The average size of branchless banking transactions, Anwar said, is Rs3,855 which shows that mobile phone technology and agent-based banking are providing financial services to unbanked poor.
While talking about the benefits of branchless banking, he said, rural customers will no longer be required to travel long distances. He further said a large proportion of population – which is unbanked – has been heavily reliant on cash-based transactions, thus causing a negative impact on documentation of the economy, the tax-base, efficiency of economic transactions, etc.
Representatives of the world’s leading software providers gave detailed presentations and discussed case studies on how mobile banking has succeeded in other emerging as well as developed markets.
Mobile banking is the only way forward, said Mathew Talbot, Senior Vice President, Mobile Commerce Sybase 365 – which was recently acquired by SAP. Pakistan is one of the fastest developing markets for branchless banking in the world, he said, which is why Sybase is here.
Sybase provides technologies to banks, which enable the latter to have full control of their bank accounts and make transactions through mobile device regardless of their location. It creates opportunities for bringing the unbanked and under-banked segments of the society into the financial network.
http://tribune.com.pk/story/350701/pakistan-rated-among-fastest-growing-markets-in-mobile-banking/
Telenor Pakistan, in partnership with the Government of Khyber-Pakhtunkhwa, will provide agriculture and livestock information to farmers in the province.
In addition, farmers will be offered the Easypaisa platform to trade in agricultural commodities. Information will be provided via push SMS, voice recordings and small community gatherings.
The aim is to benefit farmers — especially small farmers — by providing them relevant and timely information, and the ability to carry out related mobile transactions on their handsets. All information will be provided by the Government of Khyber-Pakhtunkhawa while Telenor Pakistan will act as the distribution channel of the information. A pilot project will initially be run in Mardan district.
To mark the occasion an MoU signing ceremony was arranged at a local hotel. Arbab Muhammad Ayub Jan, Minister for Agriculture, Khyber Pakhtunkhwa was the chief guest. The MoU was signed by Roar Bjaerum, Vice President Financial Services, Telenor Pakistan and Arbab Muhammad Ayub Jan, Minister for Agriculture, Khyber-Pakhtunkhwa.
Roar Bjaerum, in his comments, highlighted the benefits the project will bring to the farmers of the province. “We will provide farmers the information they need to grow better crops and to raise hardy livestock. By doing so, we want to help them make more informed decisions when it comes to agriculture and livestock planning and trading. This way we hope to contribute toward alleviating poverty and empowering farmers economically. We will also offer mobile branchless banking solutions to enable farmers to carry out transactions right on their mobile phones through Easypaisa.”
Ayub Jan in his remarks spoke about the partnership between Telenor Pakistan and the Government of Khyber Pakhtunkhwa’s Agriculture, Livestock and Cooperative Department (ALCD). He said: “The Department has the mandate of promoting the interests of agriculture and livestock farmers in the province of Khyber Pakhtunkhwa. It has undertaken various initiatives to modernize the sector, and to augment the dissemination of relevant information to farmers to help increase production. Our partnership with Telenor Pakistan is another step in this direction. We are ready to offer all the support it needs to achieve its goals for this project.”
Small farmers, living in far-flung areas, are usually isolated from market information which may help them in dealing with commodity whole sellers (‘beopari’ and ‘arthis). They also do not have immediate access to information about best practices in agriculture and livestock rearing.
Telenor Pakistan’s project will help farmers in getting the information they need to increase yield through access to best quality commodities, latest agri trends, information on judicious use of pesticides and fertilizers, best breed of livestock, new methods of disease control, and quality feed and fodder.
http://www.thenewstribe.com/2012/04/18/telenor-to-partner-with-kp-to-provide-agri-information-to-farmers/
BLEAKLEY: We see a really huge change in the wealth of the individuals, but we don’t see any difference in human capital. We don’t see that the children are going to school more. If your father won the lottery or lost the lottery the school attendance rates are pretty much the same, the literacy rates are pretty much the same. As we follow those sons into adulthood, their wealth looks the same in a statistical sense. Whether their father won the lottery, lost the lottery, their occupation looks the same. The grandchildren aren’t going to school more, the grandchildren aren’t more literate.
http://freakonomics.com/2013/11/27/fighting-poverty-with-actual-evidence-a-new-freakonomics-radio-podcast/
Now enough of these (cash to the poor) programs are up and running to make a first assessment. Early results are encouraging: giving money away pulls people out of poverty, with or without conditions. Recipients of unconditional cash do not blow it on booze and brothels, as some feared. Households can absorb a surprising amount of cash and put it to good use. But conditional cash transfers still seem to work better when the poor face an array of problems beyond just a shortage of capital.
When Give Directly’s founder, Michael Faye, went to traditional aid donors with his free-money idea, he remembers, “They thought I was smoking crack.” Silicon Valley, though, liked the proposal—perhaps because Give Directly is a bit like a technology start-up challenging traditional ways of doing things (in this case, aid). Google contributed $2.4m; Facebook, $600,000
http://www.economist.com/news/international/21588385-giving-money-directly-poor-people-works-surprisingly-well-it-cannot-deal
http://tribune.com.pk/story/999299/one-minute-bank-account-pakistan-to-have-100-million-bank-accounts-by-2025/ …
“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.
Peru (90 points) and Colombia (86) remained the top two countries for financial inclusion. The Philippines was followed by India (71) and Pakistan (64), while Chile and Tanzania (62) tied at sixth and Bolivia and Mexico (60) tied at eighth. Ghana (58) rose in the ranks to clinch the 10th place.
Finishing at the bottom of the rankings were Haiti, Congo, and Madagascar.
“One of the key takeaways from the 2015 Microscope is that there is very little policy slippage around financial inclusion; new policies are being adopted and existing ones further implemented,” the report said, though citing concern on “limited” progress among nations with average gains of only two points for the year.
As for the Philippines, the country has yet to make more progress on providing credit access on a sizeable chunk of unbanked residents, alongside putting forward technology-assisted schemes for the financial system.
“While the Philippines has been a leader in promoting and creating an enabling environment for financial inclusion, there is still much to be done, as only 26% of adult Filipinos have savings accounts and only 10.5% have access to formal credit,” the study read.
“Challenges remain in terms of scaling market innovations, particularly in technology-driven initiatives. There is also a chronic need for financial education and consumer-protection initiatives across regulated and non-regulated institutions.”
http://www.bworldonline.com/content.php?section=Economy&title=phl-still-among-microfinance-global-leaders&id=120100
https://techcrunch.com/2022/12/28/pakistan-cracks-down-on-sketchy-digital-lending/
Pakistan’s markets regulator issued new guidelines for digital lending in the country, cracking down on several sketchy practices that it said have become prevalent in the South Asian market.
The Securities and Exchange Commission of Pakistan said Wednesday evening that non-banking finance companies that disburse loans through digital channels, including mobile apps, will be required to disclose key fact statements such as the credit amount they are granting to consumers, annual percentage rates, duration of the loan and “all fee and charges.”
The non-banking finance firms will be required to share these key facts with consumers through audio or video and emails and text messages in both English and Urdu languages. “Any fee not included in key fact statement will not be charged to the borrower,” the regulator said (PDF) in a press release.
These firms will also not be able to access borrower’s phone book or contacts lists or pictures on the device “even if the borrower has given consent in this regard,” the regulator said. (You can read the full guidelines here {PDF}.)
“The lender shall also not be allowed to contact the persons in the borrower’s contact list, other than those who have been specifically authorized by the borrower as guarantors and who have also provided their consent to the digital lender at the time of loan approval,” it added.
The move follows the regulator noticing a rise in mis-selling, breach of data privacy and “coercive” recovery practices of licensed digital lending companies” and to safeguard public interest, it said.
Neighboring nation India also introduced strict rules surrounding digital lending in a move that has toppled the local fintech industry.
https://www.secp.gov.pk/document/circular-no-15-of-2022-requirements-for-nbfcs-engaged-in-digital-lending/?ind=1672222021650&filename=Circular-No.15-of-2022..pdf&wpdmdl=46436&refresh=63ac43d13db561672233937
https://profit.pakistantoday.com.pk/2023/02/08/financial-inclusion-in-pakistan-increases-to-30/
https://portal.karandaaz.com.pk/dataset/financial-digital-inclusion/1038
KARACHI: Financial inclusion in Pakistan has increased by 9 basis points from 2020 to 2022 and women’s access, specifically has hit a double-digit percentage for the first time, as recorded by a survey conducted by Karandaaz Pakistan.
As defined by the World Bank, “financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.” This means conducting transactions through banks, mobile money and fintech.
The Karandaaz Financial Inclusion Survey (K-FIS) measures the percentage of adults above the age of 15 who report having at least one account in their name with an institution that offers a full range of financial services that is also documented by the government of Pakistan.
Following a significant jump in financial inclusion between 2017 and 2020, K-FIS recorded a substantial rise in the level of financial inclusion from 21% in 2020 to 30% of adults in 2022. Registered mobile money users more than doubled with an increase from 9% to 19%, while registered bank users also increased by 4 basis points over the same period.
By region, Islamabad Capital Territory (ICT) recorded the highest level of financial inclusion at 45%, followed by Gilgit Baltistan at 35% and Azad Jammu & Kashmir at 34%.
Looking at the division by gender, male registration accounted for the bulk of financial account registrations in 2022 with 47% having at least one registered financial account. Comparatively, only 13% of women are recorded to have at least one registered financial account. Although women’s percentage accounts for less than half of their male counterparts, the financial account registration for women has reached double digits for the first time.
Overall, the largest increase was seen in mobile money wallet users, as active usage increased from 8% in 2020 to 16% in 2022. Active usage also saw an increase in bank account holders, indicating an increase from 12% in 2020 to 14% in 2022.
Addressing the webinar held by Karandaaz Pakistan on February 7, 2023, Noor Ahmed, Director of the Agri Finance and Financial Inclusion Department of the State Bank of Pakistan (SBP) said, “Over the years, there has been significant progress on financial inclusion. Key initiatives such as RAAST have been transformative in furthering the inclusion of the marginalised.”
Karandaaz Pakistan is a not-for-profit special-purpose vehicle set up under Section 42 in August 2014. The company is the implementation partner of the Enterprise and Asset Growth Programme (EAGR) and Sustainable Energy and Economic Development (SEED) programme of the UK’s Foreign, Commonwealth & Development Office (FCDO).