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Financial inclusion is defined as access to formal financial
services including savings, credit, insurance and payments
vis-à-vis formal financial intermediaries, at an affordable
cost.
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Financial
inclusion helps in reducing poverty by…
-
Increases access to bank deposits that enables individuals
to accumulate savings in a safe and secure environment
-
Reduces vulnerability of poorer households, by minimizing
negative impacts of income shocks
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Improves access to credit thereby improving asset base
-
Decreases proportion of low-risk, low-return assets held
by households for precautionary purposes
Financial
inclusion Increases economic growth by…
-
Facilitating transactions
-
Providing investment opportunities to all segments of
the population
-
Mobilizing savings
-
Facilitating inflows of foreign capital (including FDI,
portfolio investment and bonds, and remittances)
Financial
Inclusion promotes stability by…
-
Strengthening financial institutions
-
Broadening markets for financial service providers
-
Allocating capital efficiently between competing uses
and monitoring borrowers
-
Facilitating risk management through a variety of services
including insurance
-
Making money transfers more efficient and quicker
Why
is Financial Inclusion Important?
In
Pakistan, since the early 1990s, consistency in economic policy
coupled with robust financial sector reforms has resulted
in a degree of macroeconomic stability and improved access
to financial services. But despite positive developments,
Pakistan’s financial sector has not yet reached sufficient
breadth or depth.
Did
You Know?
-
More than 17% (27 million) of Pakistan’s population
live below $1 a day
-
73% (116 million) live below $2 a day
-
Only 2% of the poor in Pakistan have access to microfinance
services
-
The banking sector serves only around six million borrowers
(3.6% of the population), compared to 25 million depositors
(15% of the population)
-
Only around one in four Pakistani households hold bank
and other accessible accounts
-
On average there is only one bank branch to serve 20,000
people
-
Only 14% of the rural population is banked whereas 67%
of the total population resides in the rural areas.
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Large
Market Potential
There
is enormous market potential for financial institutions
in Pakistan spread across different sectors of the economy
as depicted below
Increasing
Outreach to Borrowers
Sectors |
Outreach
(Number of Borrowers as on March 2008) |
Potential
Market
(Estimates)
|
Current
Outreach as percent of Potential Market |
SMEs |
198,442 |
3.16
million potential SMEs in the economy * |
6.3 |
Agriculture |
1,354,272 |
6.6
million potential farm households** |
21.00 |
Mortgage
Loans |
480569 |
6
million houses required + |
8.01 |
MF
Loans |
1,591,126 |
30
million potential customers ~ |
5.30 |
Sources:
SBP and PMN
* Economic Census of Pakistan - National Report May, 2005
- There are 3.2 million business enterprises in Pakistan
out of which 99% are SMEs
**Farm households survey – 2005
+I&HF Department SBP
~ Pakistan Microfinance Network
How
is Financial Inclusion Being Promoted in Pakistan?
As
a regulator body, SBP is deeply committed to promoting access
to financial services in the sector. Besides introducing FIP,
SBP has already introduced a variety of measures:
-
Tax holidays for five years newly established Microfinance
Banks (MFBs)
-
Flexible regulatory regime for MFBs
-
Mobile phone-based banking services
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Development of Islamic Banks
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Promotion of Small Enterprises financing through products
and credit scoring systems
-
Credit schemes for agricultural finance
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