Daily Times

Over the years Pakistani governments have been reiterating the need and devising strategies for saving and investment. But lack of political stability, inadequate infrastructure, corruption and other factors typically associated with developing world have hindered foreign investment into the country. Yet another important aspect that has hugely been in oblivion, is the absence of vibrant and efficient financial markets.

For financial markets in an economy to function well and to fulfill its rudimentary requirement, financial intermediaries are of paramount importance. Countries like Pakistan where capital acquirement is a big challenge for entrepreneurs and other business people, financial markets and intermediaries have failed to do the needful. They have indeed catered for the privileged and big guns but the small investors and businesses have failed to take advantage.

Every economy needs its own idiosyncratic ways of financial intermediation. In Pakistan, our homes and neighborhoods are superfluous with unused-financial-abundance but at the same time huge deprivation, poverty, unemployment, malnourishment and maladies alike do persist. This juxtaposition requires our acceptance of a problem rather than lamentation.

We need to be finding creative solutions to our economic problems. How to bring the unused funds lying idle at homes and neighborhoods into the financial markets. How the people and businesses with insufficient funds can be facilitated and evaluated for the desired funds in an efficient and cost-effective manner. And how financial intermediaries can create, evolve ways and outlets that reach out to every sector of the society.

According to the World Bank, only 21% of Pakistan’s masses have a transaction account or are banked. Only 7% of women have a transaction account. These figures are disquieting. It means that by no means the country’s 79% are contributing in an organized manner to the national economy and also can’t invest or take advantage of the big economy. Which translates into a highly ill-regulated, undocumented economy and lower tax net, burdening the already taxed.

For me, there are two standing-out reasons for this puzzling situation and consequent voids in the financial markets. Lack of creativity and trust. Let’s examine both.

For creativity, platforms need to be ignited with the kindle of reward and recognition. Platforms such as universities, research institutions and business forums should be recognized and funded in order to bring out creative ideas and implementing them real-time through intrapreneurs and entrepreneurs. University research needs to be encouraged, properly funded, and linked to the market. Out of the box initiatives and heresy need to be accepted and flourished rather than strangled to death by mechanization and bureaucracy.

Another aspect which needs a little let-off is university-start-ups. We squander so much every year by bailing out railways, PIA and other white elephants. Last November 2018 PIA requested Rs. 17 billion as bailout and was approved. In July 2018 Pakistan Railways’ losses were reported to be Rs. 40 billion by the auditor in a Supreme Court hearing. In the current dissipation, let youth waste a few billion in creative startups. If the students along with their teachers can provide ways and means of how to creatively bank and include the 87% percent into the economy, the bet is a profitable one, even if we have a few initial losses. Once the process is made idiosyncratic and the unbanked and excluded are brought into the net. The financial intermediation reaches every village and town in the mountains.

The other aspect is of trust. Our women with hack amount of gold, which they seldom wear and use. They need trust. Trust can be divided into three categories. Trust of security, trust of Islam-ability and trust of easy accessibility.

In a country where fraud and lying is a national ethos, trust of security would be an essential element to build. At the grassroots level, building a seamless system of transparency, connected to the economy would be a whole new interesting challenge. The people who are excluded, especially women, who are rarely educated, granting them the confidence that their asset is secure, well documented and is marketable will be a test of the abilities of the intermediaries and creative minds. Developing a system, most preferably online, which should keep them in charge of their financial assets without the interference of the societal messiahs such as elders, husbands and brothers, should be a priority. At the same time keeping the system flexible, liquid, easily accessible and understandable.

Another important aspect is Islam-ability. We cannot ignore or change our strong and inalienable roots in Islam. Making the whole system religiously acceptable for those who want to stay pious will be a new dimension to it. To keep up with the essence of creativity, this trust cannot and should not be built on fatwas. Combining profit and loss in an environment of creativity would be a huge litmus test for these creative minds and intermediaries. As Islam lays out basic principles for business, the young creative minds should be allowed to practice and innovate freely adhering to the principles of Islam without active and subordinate reference to the religious madrasas.

The whole trust doctrine would be incomplete without granting the needed access and control to the saver cum investor. If Facebook and cellular phones can make the far-flung connect and access to their personal social media account why not the financial people.

The voids in Pakistan’s financial markets, institutions, and the financial system are opportunities, not black holes. These opportunities need to be tapped by young, energetic and creative minds. The country which is facing multiple problems from all fronts, access and inclusion of the untapped financial resources will not only give the economy more to eat and produce but more food, inclusion, education, health, security, independence, dignity and control to the people who are always looking to the government and affluent for help. Inclusion into the mainstream should be the ultimate aim. Taxes, political awakening and more awareness are to follow if that is what the government and policy people want.

The writer teaches strategic management and finance at the Department of Management Sciences, The University of Haripur.