Meezan Bank calls financial inclusion critical for growth

CEO says it will allow banks to extend affordable financing to rural areas, meet socio-economic goals

Maidah Haris January 20, 2019
CEO says it will allow banks to extend affordable financing to rural areas, meet socio-economic goals. PHOTO: FILE

KARACHI: The past year has been rocky for Pakistan’s economy as fast depleting foreign exchange reserves, massive depreciation of the rupee and the plunging stock market failed to inspire any confidence in investors.

Given the uncertain climate, Meezan Bank President and CEO Irfan Siddiqui shares how banks can help boost economic development.

Meezan Bank, launched in 1997 as an investment bank with initial paid-up capital of Rs721 million, has since recorded an average growth of 40-50% in its branch network each year.

In an interview with The Express Tribune via email, the bank CEO said financial inclusion is the most important driving force for economic growth. “The coexistence of financial inclusion and a stable economic climate will allow banks to further extend affordable financing to rural areas, thus meeting some important socio-economic goals.”

In this regard, the State Bank of Pakistan (SBP) has already initiated efforts to enhance access to financial services in the country. Recently, at an event in Islamabad, the central bank launched the deployment of blockchain technology in the banking sector - a major milestone in Pakistan’s plan to achieve financial inclusion.

Siddiqui was of the view that a strengthened banking industry can spur growth by facilitating allocation of resources to infrastructure projects, which can help increase productivity at the national level. He added that it was one of the core functions of banks to efficiently channel the depositors’ savings for financing the private sector and SMEs.

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The president said banks can play a greater role by utilising the SBP refinancing schemes for renewable energy projects but he lamented that such facilities were not available to Islamic banks.

“Such refinancing facilities should also be available to the Islamic banks so that energy shortfall can become manageable, which will result in more sustainable economic growth.”

Under the schemes, financing facilities are provided through all commercial banks and development finance institutions (DFIs).

Although long-term financing for various industries, including the SMEs and agriculture sector, are still issues that need to be addressed, the SBP’s focus on financial inclusion and promoting the SMEs is a step in the right direction.

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“Owing to the SBP’s deliberate focus on financial inclusion, things are changing with some improvement in conversion of the unbanked population towards banking channels.”

Siddiqui remarked that banks are no longer dependent on physical structures but have moved to alternative channels and branchless banking. “Mobile wallets are becoming more and more popular as the SBP further pushes for developing a tier of simplified accounts,” he stated.

Sharing future plans for Meezan Bank - the first and largest Islamic bank in Pakistan, he said, “We are focusing our efforts on enabling financial inclusion in the country and reducing the overall gap in access to finance.” Focus on technology is an important part of the future strategy, he stressed.

“We are forging ahead with a notable determination to embrace digital banking and build more digital customer engagement. We already have well-established alternative delivery channels.

“Our future plans, therefore, must be more holistic and sustainable in nature and in line with our Shariah-compliant practices and values.”

Talking about the China-Pakistan Economic Corridor (CPEC), Siddiqui said it was an opportunity to capitalise on for Pakistan and Islamic banking. “We are identifying the routes CPEC will take in order to establish branches there.” He was optimistic that the opportunity to offer Islamic bonds (Sukuk) for infrastructure will grow under CPEC projects.

Published in The Express Tribune, January 20th, 2019.

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