Banking sector of Pakistan is
demonstrating satisfactory expansion providing modern facilities like e-banking,
branchless banking, micro finance sector, installation of more automatic teller
machines (ATMs) and increased percentage of real time online branches (RTOBs).
Also growth of conventional banking services by increased number of physical
branches. Although these formal banking solutions are showing rapid increase yet
16 million account holders in Pakistan comprise only 9% of the population.
The general reasons faced by the public to access these formal banking channels
are distant branches, complex procedures while opening accounts, lack of
documents required by the banks, trust issues, increased fraud and money
laundering practices and also high living costs that deplete the probability of
savings. To utilize the full potential of financial markets state bank of
Pakistan is playing key role resolving these issues. It had been made mandatory
by state bank licensing policy for all banks that 20% of the branches would be
planned for rural and distant unbanked areas.
Comparing the stats presented in recent reports by State Bank of Pakistan (SBP)
the expansion rate of banking infrastructure has seen remarkable increase.
According to quarterly review of fiscal year 2011 FY11Q2, the ATMs
infrastructure was added with 172 machines bringing the total to 4,734 from
4,217 FY10Q2. Whereas 309 branches were upgraded to real time online branches (ROTBs)
accounting a total of 7,036 ROTBs from the previous value of 6,587 ROTBs stated
in FY10Q2. This growth trend followed by the latest reports has hit record
numbers with 6,232 ATMs and 9,869 ROTBs now operational according to quarterly
review of fiscal year 2013 FY13Q2. Thus 94% of the bank branches are now
offering RTOB services out of total 10,523 branches.
State bank also sees e-banking as an alternative, relatively simple and save
method to assist unbanked population. E-banking umbrella covers major services
including internet banking, mobile banking, ATMs network, point of sales (POS)
places where retail transactions are carried out, and real time online branches.
There are 120 million connections provided by the cellular companies of Pakistan
which surely encompasses a major portion of unbanked population as well. The
mobile banking provides services like bill payments, mobile top-ups, accounts
history and easy transactions both national and international. Further
expansions to mobile banking can bring new loan schemes, insurance schemes or
similar products. Electronic money transfers through mobiles phone services
provide better security and convenience over cash based transactions and extends
its access to unbanked low income individuals as well. These facilities attract
banking institutions because these are cost effective as they reduce the costs
incurred by physical branches and hired employees. The issuance of ATM cards
also removes the hassles of counter based withdrawals and is also available
24/7, these facilities can be further modernized as practiced in countries like
China where money deposits are possible through ATMs.
Another area that has seen tremendous growth is the branchless banking, a very
attractive way of facilitating the unbanked population. According to stats our
country has the largest branchless network of Asia with about 42,000 agents
working. These services provide the facility to open current or saving accounts
(on saving interest percentage is offered), however 87% of the transactions
through this channel is over the counter (OTC) where money is directly handed
over to the agent and the transaction is made to the recipient rather than
through the account. The reasons being people don’t see the need to open an
account or nobody in their family possesses an account and a large percentage of
population is still unaware of the branchless banking. Also to open an account
at branchless terminal agent there needs to take the photograph of the party who
needs to open the account and also of the National Identity card and then send
it to banking officials for verification. This process requires agents equipped
with proper equipments like camera, database access and internet facility, thus
the process become costly so a small percentage of such agents is authorized to
register a new account. To resolve this issue a new term is introduced ‘shared
agents’ providing services to multiple providers at the same time. Branchless
banking grows significantly and there are now 2.1 million registered accounts.
During the Oct-Dec 2012 quarter according to state bank quarterly review 35
million transactions of worth Rs.151 billion have been carried out through
branchless banking.
Despite the attraction and ease provided by these solutions to unbanked
population, such services are still not able to draw customers up to the
potential seen by analysts. There are multiple reasons hindering the utility of
these services including low literacy rate among the population, unawareness of
the facilities, lack of interest and slow penetration rate of internet services.
However on the brighter side growth in these services will eventually lead a
smooth transition of major percentage of unbanked population to avail these
services. With proper awareness programs and more flexible procedures the
margins of unbanked population and the ones having access to formal banking
channels will be narrowed down facilitating the financial industry as well as
country’s economy. Finally with 65% of the country population below 25 years
bringing latest technology and innovative banking methods is always a welcome
sign and the adaptability trend is definitely seeing a rise.