WEB DESK: The introduction and revamping of branchless banking in the country over the past few years has been a major policy strategy of State Bank of Pakistan (SBP) to extend the outreach of financial services to various segments of society, particularly in the semi-urban and rural areas.
The objective is to have a wider financial net which could capture a large chunk of population that is partially or fully excluded from the provision of financial services. In order to help the cause of such an initiative, SBP has developed a National Financial Inclusion Strategy (NFIS) which was formally launched in May, 2015 to build up momentum and push forward reforms to achieve universal financial inclusion in an integrated and sustained manner. On 13th July, 2016, SBP took yet another step towards revamping Branchless Banking Regulations to keep pace with the international branchless banking practices and achieve the targets set out in NFIS.
According to fresh instructions, boards of directors of banks would be responsible to provide strategic direction and maintain oversight while senior management would be required to institute necessary internal controls and ensure adherence to applicable laws and regulations. The scope of alternative delivery channels and technologies has been expanded to include 3G and 4G spectrum, POS terminals, internet banking and ATM/debit cards, etc, for providing branchless banking services. SBP has also introduced interbank funds transfer service with or without biometric system. Besides, the limit for person-to-person (non-account holders) transactions conducted through biometric verification system has been increased.
The latest initiative of SBP to extend the outreach of financial services is of course appreciable due to its positive impact on its NFIS which seeks to expand the outreach of banking services to all segments of society. There is no denying the fact that at present branchless banking is the main driver and the most effective tool for achievement of targets set in NFIS which envisage a growth of 50 percent in bank accounts held by the adult population by the year 2020 with the underlying purpose of extending financial services to the under-banked and unbanked populations of the country.
Noteworthy is the fact that growth in branchless banking so far has been exponential and prospects for its future growth also appear to be very bright. This is so because while the urban areas seem to have reached a saturation point in terms of supply of financial services, unbanked and remote areas of the country are still largely deprived of such services.
The population of the later areas would therefore welcome these services enthusiastically and with open arms. A cursory glance at the past developments would show a highly encouraging response in this respect. For instance, according the latest Economic Survey, the number of branchless banking accounts witnessed a threefold growth, rising from 5.4 million in December, 2014 to 15.3 million in December, 2015. On a YoY basis, the number of transactions grew from 278 million (Jan-December, 2014) to 374 million (January-December, 2015), showing an increase of 35 percent while average deposits in BB accounts reached Rs 8.8 billion in December, 2015 from Rs 6.6 billion in December, 2014.
This clearly shows that there is a huge potential in the market for expanding the outreach of branchless banking and much needs to be done to bring the unbanked socio-economic class into the formal financial sector. It is good to see that the SBP is making the necessary efforts and taking timely steps towards meeting the goals of NFIS. There is no doubt that broadening and deepening the financial sector could have a positive and significant impact on economic development of the country through mobilisation of more and more financial resources and ensuring their efficient utilisation.
Besides, the movement in the desired direction could help reduce income inequality by increasing the ability of individuals in unbanked areas to access financial services like credit and transfer of funds.
Source : Business Recorder