Daily Times

Being an important player of the national economy, the financial inclusion envisages equal access to fund based and non-fund based banking services by masses and businesses at the most feasible rates. It particularly includes the extension of different sized loans and advances to the low-income segment of the economy.

Thousands of branches of these banks have gone wrong in pursuing financial inclusion and seem to be on a wild goose chase under the effect of their current policies. Revolving around three major economic indicators – savings, investments and credits – financial inclusion comes up for the good of disadvantageous section of the society. The low rate of financial inclusion gives rise to informal borrowings and ultimate social breakdowns. According to SBP’s Access to Finance (A2F) Survey, 22 per cent of Pakistanis have opened a bank account, as compared to the 96 per cent in the US and 54 per cent in India. These numbers represent “the rate of financial inclusion.”

A lower rate pinpoints a disgruntled standard of life, limited economic activity and a higher probability of acquiring high-priced private borrowings.

Pakistan’s banking system has failed in painting the true picture of financial inclusion. Every year, almost eight per cent of the existing bank accounts become dormant, which causes a misinterpretation of the level of financial inclusion in the country. It condenses banks’ capabilities to accumulate deposits as well.

A Gallup Pakistan’s survey reveals that 29 per cent of Pakistanis is not acquainted with the term “Islamic Banking.” Around 30 per cent of the general public knows nothing about the ATM and somewhat 48 per cent of Pakistanis believe that only employed people have the right to open a bank account.

Owing to high financial illiteracy, 24 per cent of the country’s adult population does not believe in mobile money transfers. The condition of financial inclusion is horrible in Pakistan and the banks are perhaps nowhere.

The policies of Zarai Taraqiati Bank Limited (ZTBL) have appeared to be unsuccessful in granting agricultural loans to farmers at affordable rates. The fate of farmers could otherwise be changed by promoting financial inclusion in the agriculture sector at subsidised rates. As a remedy, the farmers could be issued Kisan Cards instead of approving subsidies for agricultural inputs.

The present moves of FBR have added fuel to the fire. People are just afraid of banks and have started relying upon cash transactions. The Federal Board of Revenue could quash its instructions already given to the banks regarding customers’ financial information.

The reports from the IMF dictate that financial inclusion enhances inclusive growth by opening economic opportunities. Access to financial services enables families to satiate their consumption and invest in their education and health. Availability of credit ensures the expansion of the businesses and creation of jobs for many.

With 57 scheduled and private banks, 11 microfinance banks, six foreign banking companies and seven developmental finance institutions, Pakistan’s lending machinery has failed to diffuse the financial inclusion in the country

The SBP has devised a National Financial Inclusion Policy, which sets dynamics to achieve a reasonable level of financial inclusion in the country. The policy could address the problem of higher financial illiteracy, which is suspected to reach 74 per cent.

All scheduled and private banks could propagate financial literacy and increase the number of account holders under different heads and demographics. The lending machinery of the country – banks, leasing and insurance companies, and finance houses – could loosen the eligibility criteria for the acquisition of finances by all and sundry. Since financial inclusion becomes support for the low-income class, the provision of huge collaterals could also be revised.

Banks in Pakistan usually sanction loans to the customers who already have enough assets, proving their liquidity position to pay off their financial obligations at any point of time. Revisions in the mechanism are needed.

The State Bank of Pakistan could support the matter through scrupulous scrutiny of the companies engaged in the business of electronic money. Nearly 80 per cent of Pakistanis uses mobile devices, which is good to fling the seed of financial inclusion. A relevant working plan needs to be configured. Guidelines for promoting mobile banking could be contributive.

No small business in Pakistan has access to loans. It limits expansion. SMEDA could do enough to shoulder the small businesses. The use of technology could revolutionise access to financial services at lower costs, which conventional banks are hesitant to do. The recently launched PM’s Kamyab Jawan Program is centred at SME lending. Keeping the fingers crossed, the program is supposed to contribute to the national financial inclusion by imparting economic growth, empowering small businesses and rectifying the economy.

It is the obligation of every state to ensure systematic diffusion of resources throughout the economy, leaving no room for the concentration of wealth. Working on financial inclusion could produce results!

The writer is a researcher and journalist