KARACHI: Pakistan is in the process of establishing a robust financial system. While the road is lengthy – it aims to provide financing access to around 50% of the adult population by 2020 – the journey has begun.
For this purpose, the State Bank of Pakistan (SBP) launched a drive in 2015 to connect at least 50% adult population with banks under the National Financial Inclusion Strategy (NFIS) 2020.
The strategy has so far provided 23% of the adult population access to formal financing services compared to 12% in 2008. Despite the much needed growth, which came after innovative mobile banking solutions launched in recent years, the pace of progress for connecting the targeted number of people in a population size of over 200 million in the set timeframe remains doubtful.
Karandaaz Pakistan – a not-for-profit financial services company – is one among many playing its part in the support of achieving the national goal.
“Our interventions fall under two main rubrics. Firstly, MSME finance where we aim at improving access of finance for micro, small, and medium businesses (MSMEs), and secondly, digital finance, where our goal is to connect the financially excluded population to financial services using mobile technology,” said Karandaaz CEO Ali Sarfaraz.
Whether the country is able to meet all the targets laid out in the strategy is yet to be seen, but “we should remain focused on maintaining this momentum and working collectively towards the NFIS targets, he remarked.
“The (NFIS) target seems far-fetched without adequate technical and advisory support from the country’s financial sector,” he added.
Karandaaz Pakistan is running a comprehensive drive through the financial support of UK’s Department for International Development (DFID) and Bill & Melinda Gates Foundation to extend support to the government’s ambition.
“DFID has committed £187 million through Karandaaz to be invested till March 2024, out of which the company has already invested about £46 million towards MSME (micro, small and medium businesses) finance. These funds have been used to inject growth capital directly into SMEs as well as through wholesale arrangements with financial partners to improve access to credit for SMEs and micro-enterprises,” Sarfaraz explained.
It is also partnering with the Agriculture Department, government of Punjab, for roll-out of e-credit for farmers. The company is providing technical support to enable digital channels, such as mobile wallets, through which credit can be disbursed directly to the farmers.
So far, more than 16,000 farmers have started receiving loans through mobile wallets and the plan is to increase the number to 500,000 small famers with a landholding of up to 12 acres. Moreover, its work with the Central Directorate of National Savings (CDNS), Pakistan Post, and its contribution in micropayment gateway will encourage formalisation of small transactions and segments that have not used the formal financial system till now.
The company has ambitious expansion plans to scale up its operation in the coming years, said the CEO.
He informed that the company is targeting to double the number of SMEs in its credit portfolio to reach over 600 SMEs by 2019. “Various large scale projects under our digital finance work stream will reach full-scale implementation over the coming months. These include our partnership with CDNS whereby their customers will get access to alternate delivery channels, the project with National Bank of Pakistan for digitising government receipts and payments, and the efforts to create a micropayments gateway in the country at the State Bank of Pakistan,” he said.
Karandaaz Pakistan CEO said that the company will leverage its Innovation Challenge Fund (ICF) and fin-tech Disrupt Challenge rounds to identify and target the best ideas with potential to reach unbanked and excluded segments.
Published in The Express Tribune, April 21st, 2018.