Investing in Pakistan’s future


WEB DESK: The two high profile visits to Pakistan last week – of World Bank President Jim Yong Kim and UN Secretary General’s Special Advocate for Inclusive Finance for Development, Queen Máxima of the Netherlands – focused on implementation of the National Financial Inclusion Strategy (NFIS) comprising a roadmap to assist Pakistan achieve financial inclusion goals.

The World Bank Group (WBG), with financial support from the Bill and Melinda Gates Foundation, assisted the State Bank of Pakistan (SBP) to design and launch its NFIS and provided extensive technical analysis, facilitated consultation workshops, and proposed a co-ordination mechanism structured in the form of a taskforce or steering committee. The committee comprised representatives from different implementing agencies and other relevant actors. The WBG staff, according to its website, jointly drafted the NFIS with the SBP and Securities and Exchange Commission of Pakistan, as part of the overall SBP-led process. It was, however, announced to the media more than nine months ago on 21st May 2015 by Federal Finance Minister Ishaq Dar.

Kim while participating in an SBP-launched event for the World Bank Group support to Pakistan’s financial inclusion reform agenda stated that “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”.

The need for the Strategy in Pakistan was patently evident; given four disturbing statistics: (i) only 13 percent of adults possess a formal account according to Global Findex 2014; (ii) less than 5% of women are included in the formal financial sector, compared to South Asia’s average of 37%; (iii) more than 100 million are unbanked and account for 5% of the world’s unbanked population; and (iv) 7.5 million Pakistani adults cite distance to a financial institution as a barrier to opening a financial account. In addition, the financing needs of micro, small and medium enterprises (MSMEs) are not met by the formal financial sector accounting for only 7 percent of total bank credit to the private sector with 3.2 million SMEs but only 188,000 SME loans outstanding in bank’s books.

As far back as in 2011, the Planning Commission of Pakistan launched the National Nutrition Survey whose findings were disturbing as it revealed that only three countries accounted for half of malnourished women and children globally and Pakistan was one of them. In addition, the report found that 58.1 percent of Pakistani households are food insecure with only three percent children receiving a diet that meets the minimum standards of dietary diversity. “Major factors leading to chronic malnutrition in the country are poverty, high illiteracy rates among mothers and food insecurity,” the report added. Greater access to finance is without doubt the only way forward to change these distressing statistics.

Pakistan’s first-ever NFIS envisages universal financial access, with a target of expanding formal financial access to at least 50 percent of adults, including women and youth, and to increase the percentage of SME loans in bank lending to 15 percent by 2020. This is to be achieved through (i) promoting digital transaction accounts and reaching scale through bulk payments; (ii) expanding and diversifying access points; (iii) improving capacity of financial service providers; and (iv) increasing financial awareness and capability.

A national co-ordination platform for all stakeholders from both public and private sectors has also been set up for implementation of the reforms and various initiatives for financial inclusion under the strategy. The NFIS co-ordination structure envisages three governance bodies, an NFIS Council, an NFIS steering committee and various technical committees. The NFIS council is chaired by the federal finance minister to oversee the implementation of NFIS. The council had its first meeting in April 2015 to adopt the strategy and disturbingly no other meetings since were reported. According to sources in the Ministry of Finance, the delay maybe attributed to the delay in the visit of the World Bank President which is unfortunate as the strategy merits speedy implementation.

The federal finance minister has been made the chair of the NFIS council not only to ensure that the social sectors receive greater attention and share of the federal allocations than the abysmally low amounts that have been their lot thus far but also that all impediments, particularly financial, in the way of implementation of NFIS may be removed forthwith. It is hoped that Pakistan as a country will begin to invest more in its people to address the shameful problem of malnutrition resulting in stunting. The latter reduces the number of neurons in the brain by about 30 percent that seriously compromises the ability to learn. Unless we tackle this as a top priority, the portents are too grim to be speculated.

Source: Business Recorder