Dear Readers,
Financial inclusion is the delivery of financial services at affordable costs to all sections of disadvantaged and low-income segments in society. According to the World Bank, around 2 billion people do not use formal financial services and more than 50% of adults in poorest households are unbanked. As of 2017, nearly a quarter of Pakistani adults had opened a bank account, compared to a mere 13 percent as recently as 2014, while overall accounts, and mobile phone banking specifically, have been on the rise, women have been largely left behind. The World Bank has set a goal to achieve universal financial inclusion by 2020 and in light of the importance given to financial inclusion and its proven benefits in poverty reduction, Pakistan has also taken several steps but still lags far behind the goal of achieving financial inclusion. TELCOS in Pakistan are doing a good job providing a platform for millions for transferring money but they are more inclined towards price wars of voice and SMS, many are sponsoring as opposed to investing. As new players enter the field, branchless services in Pakistan should be headed towards growth and healthy competition, but this will depend on how the industry overcomes issues confronting it. Even in this age of digitalisation a sizeable population in Pakistan does not use any recognised form of financial services. It is about time that TELCOS ensure that the marginalized social groups are included into the economy otherwise it could have serious implications. For the benefit of readers my article titled, “GOVT FIRM ON FINANCIAL INCLUSION” is reproduced below.
Employing several thousand people, one becomes acutely aware on a daily basis about the many problems faced by the salaried class, force-multiplied many times over for those on the lower end of the scale, what we call “blue collar workers”. After catering for direct and indirect overheads the profit margin in “guarding services” business does not touch double figures (in percentage) from the revenues the company earns through contracts. About 80% of the salaried class irrespective of their being blue or white-collar workers run out of their salaries between the 22nd and 25th of each month. White collar workers can tap financial institutions for getting credit on short term basis against their monthly salaries. To put food on the table, the only option for the low-paid employees is to go to loan shark’s to borrow Rs. 2000-3000 every month.
The average interest charged by the loan sharks is 120% per annum on the average, i.e. 10% per month. Continuing over the months quite regularly, the personal debt cycle keeps on mounting and eating away into their earnings. Whatever annual pay increase they receive every year is thus gobbled away by this vicious cycle.
Because of excessive paper work and documentation many who are functionally illiterate still hesitate to open an account. Moreover financial institutions see the poor and low income groups as a risky customer segment that has very little potential for revenue and profits. While taking away man hours in customer service almost 85% of the population in Pakistan this remains “unbanked” and a matter of great concern for successive govts. To add to their discomfort payment of utility bills, school fees, etc. involves long queues. One must do something to provide some relief to the masses caught up in this never-ending debt abyss.
To bring the “unbanked” out of the cold and reduce extreme poverty while boosting shared prosperity, the World Bank (WB) has put forward an ambitious global goal, to reach Universal Financial Access (UFA) by 2020.For poverty alleviation WB’s “Financial Inclusion” initiative is being assiduously pursued by the State Bank of Pakistan (SBP). Countries that have achieved the most progress towards “financial inclusion” have agreed to, among other things, allow “mobile financial services” as the key enabler.
The financial plight of our own salaried employee’s mode us turn to technology. The enormous skills and talent among of our youth and their commitment to Pakistan is really amazing. Investing in creating on innovative digital switch locally we obtained a PSO/PSP licence from the SBP. To augment that licence we followed the “mobile wallet” route and applied for a Third Party Service Provider (TPSP) licence from Pakistan Telecommunication Authority (PTA). Once it is operative those at the lower end of the scale con open up accounts on mobile wallets on the “Asaan Mobile Accounts” (AMA), the innovative financial inclusion initiative planned jointly by the SBP and PTA and supported by the World Bank (WB) to bring the “unbanked population” into contention. Incidentally this is possible because of electronic documentation mode possible by NADRA who deserve all the plaudits for this.
The TELCOS have done a tremendous job in providing the ease for our gigantic population, there are over 120 million mobile telephone users across the country. Almost all of the unbanked” hove become potential clients to this fine initiative of The TELCOS for transferring money. In order to further streamline e easy transfer of money, the SBP gave permission to the TELCOS open banks, three very successful banks have been opened by e TELCOS, Mobilink Bonk, Telenor Bonk and U Bank. With a huge majority of cell phone users listening to music, songs, using WhatsApp, exchanging text messages, ploy games, the easy trouser of money, etc. almost 95% of the time, is already giving very odd return on investment (ROI). Looking at potentially 50 million AMA accounts force-multiplies the TELCOS profits. However other established commercial banks access will eat into their anticipated profit. This concession by the SBP allowing them to have their own Banks has become somewhat of a Cotch-22. With their knowhow, banking potential and universal coverage, banks like HBL, HUBL, MCB, NBP, Bank Alfalah, Allied Bank, Meezan Bonk, etc. not to mention the dozens of micro-finance banks, will cut into the TELCOS potential “captive” customers. Despite already earning enormous profits, Corporate Social Responsibility (CSR) activity is not exactly a priority as disarmingly acknowledged by a brilliant chief Executive of a TELCO at a recent public Presentation.
For the TELCOS the AMA initiative really should be a National Social Responsibility, a notional obligation to ensure that the poor people of the country come out of their debt trap and are able to use their hard earned money for useful purpose. Despite all the encouragement and support from the SBP and the PTA for the mobile industry extending their financial services to the masses, they are being shortsighted and delaying tactics ore being resorted to. Something to can be solved in a maximum of seven days has now gone on for 9 months. The authority regulating the TELCOS the PTA has been trying hard to bring the TELCOS operating in Pakistan, except for one that is a portly Pakistani, being foreign-owned, to the table.
Because “Coincidentally” the shareholders of the two other applicants turned out to be directors/ senior executives from three of e TELCOS, one initially thought that the process was being deliberately delayed to facilitate other entities sponsored by the TELCOS time to apply. However, this is only partly true. Actually, the commercial banks and other financial institutions participating in the AMA revenue sharing will be counter-productive to the TELCOS profits and they would have access to the data of 120 million Pakistanis which the TELCOS are reluctant to shore. The irony is that detailed financial information to foreign data collecting agencies like has happened in the case of FACEBOOK will be available. One is confident that our intelligence agencies are not sleeping. A proposed US$ 1 billion purchase of “1000 mobile towers” by Indian interests through a front company in Malaysia, the so-called “deal of the country”, was foiled by our intelligence agencies. Who was the Indian tycoon behind their project? And what are his known connections to the present BJP govt? And to RAW? Can you imagine what on enemy entity practicing “hybrid warfare” against Pakistan con do with all this row data? With the social media mode possible by the TELCOS already being used as a weapon of influence, this is a potential notional security threat of the gravest proportions.
That the executives of the foreign TELCOS have the best interests of their corporate masters foremost is not a surprise or something to be condemned, it is a commercial reality. However almost all the executives being Pakistani, they will certainly hold Pakistan’s national interest paramount. We must be careful to ensure that the ghosts of the “East India Company”, where profit was their religion and money sent to their masters abroad their God, have been exorcised.
While TELCOS certainly do not take part in money-laundering themselves, they do provide, unknowingly, a digital platform for facilitating money-laundering. Kudos to the FIA for having recently unearthed more than 2000 individuals in Lahore alone having SIMs engaged in the money-laundering business. That is the tip of the iceberg. The FIA must not only use commended but encouraged to investigate all these using SIMs to transfer 5 times the limit of Rs. 25000 per day imposed by PTA and SBP. Very strict electronic oversight is very imperative to ovoid notional security lapses.
Governor SBP Tariq Bajwa recently briefed the Federal Finance Minister about the progress in its “Financial Inclusion” initiative. Asad Omar was very firm about giving it the utmost priority and including it in lmran’s “100 Day Plan”. Commending the SBP and PTA on their joint initiative. While pointing out two small adjustments the finance minister on Oct 18 announced the “AMA pilot project” was good to go. After the meeting Governor SBP confirmed the go-ahead of the “pilot project” and said the launching of AMA commercially would begin on Jan 1, 2019. The govt’s firm intention, as vociferously expressed by Asad Omar, and reiterated by Tariq Bajwa, is that the underprivileged must have full access to banking services. To back this great initiative the SBP, PTA and the TELCOS must ensure that the Imran Khan Govt succeeds in their effort lo overcome the man-mode hurdles in alleviating the untold miseries of the 85% poor and downtrodden who remain “unbanked”.
“The opinions/views expressed in Defence Journal are entirely those of the writers and cannot be construed to reflect the official views of Defence Journal”.
