No need to run for your money: Banking and investment options for the modern Pakistani woman

Navigating your finances during your 20s, 30s and 40s is no easy feat. Here’s how to sail through successfully

The average woman in Pakistan these days has moved beyond the confines of her traditional arena. In addition to maintaining a perfect household, she can now run full-scale multinational corporations and even government institutions without ever compromising on her personal life. This has prompted the modern Pakistani woman to comprehend and manage her finances herself, a role conventionally undertaken by her male counterparts.

Historically, the ability of women to deal with accounts has always been questioned, not just by men but by women themselves. They generally undermine their own ability to succeed financially and therefore, shy away from trying, without realising that they are both their own best friends and worst enemies when it comes to money. According to Saqlain Hassan, a business development officer at Allied Bank, “Women by nature lack the risk-taking and decisive attitude needed for quick investment decisions.” This is not to say that they are unsuited for the numerical world — Saqlain sees plenty of female entrepreneurs at his desk every day. “On the other hand, women are much more cautious compared to men and calculate risks thoroughly.”

The first step towards financial prowess would be for women to take ownership of their money and understand the variety of banking and investment options available to them. Investing will be different for women in different roles, according to their respective lifestyles. Below are some tips for women to follow, according to the stage of life.

Single women

If you are in your early 20s, single and completing your higher education or working full-time, you literally have your whole life before you. Free from the burdens of household expenses and family planning, you are in the ideal position to invest some of your money and keep the rest for occasional shopping and social gatherings. “At this stage, you have the all the independence you need to take risks with your money,” explains financial consultant Basit Khan.* “It’s the ideal time to start investing!”

Right now, few of you will be thinking long-term and want quick and easy returns on your money. Unfortunately, short-term investments don’t afford ample time for the money to grow. In such instances, it is advisable for you to put your money in traditional instruments like liquid mutual funds or equity mutual funds. By definition, a mutual fund refers to an investment vehicle funded by shareholders (you) that trades in diversified holdings (company stocks, financial bonds etc) and is professionally managed (by the bank or specialist institutions.) Your investment will be monitored by qualified professionals to develop your portfolio and therefore, minimise risk of loss. Open-ended mutual funds are priced daily and you can sell off your holding in the mutual fund anytime, without having to worry about finding a buyer at the right time.  These are also registered with the Securities and Exchange Commission of Pakistan (SECP), ensuring their validity. “Standard Chartered Bank offers an equity-based, Shariah-compliant option called the Meezan Islamic Fund,” shares Basit. “It is a relatively high-risk, high-return fund which offers good profits. Generally, customers have to wait about a year for the fund to mature satisfactorily.” You and your fellow shareholders share in the mutual fund’s gain or loss equally or in proportion to your respective investments.

A stock market is another easy option, provided that you have the time and desire to follow its variations daily. Herein, you will be pooling in your money as capital into a company of your choice which will give you a share in its profits in return. “Stocks are the highest-risk, highest-return strategy,” explains private wealth consultant Rafay Haqqani.* “The best time to invest is when a company is coming up or the economy is down as share prices will be low. Once they increase, you can sell off your shares and earn yourself a good amount.” Before investing, however, research your chosen company thoroughly to avoid risk of default!



Married women and homemakers (working and non-working)

As wives, mothers and part/full-time workers, you are probably knee-deep, juggling your personal and professional lives. You barely have the time to catch your breath, let alone research financial decisions and calculate potential returns. Nonetheless, you worry about your son’s education, your daughter’s marriage and whether your current apartment is big enough to accommodate your next baby. You want to make the right financial decision — one that will reap the best monetary rewards and require the least scrutiny.

If this sounds like you, then a Systematic Investment Plan (SIP) is what you need! Flexible and easy, SIPs auto-debit money from your bank account and invest it in specific mutual funds. This allows you to invest a pre-determined amount at regular intervals (weekly, monthly etc). One does not need large, lump sum amounts to make these investments; small portions of your salary or household expenses can be allocated. Trained professionals will oversee your investments and make timely entry/exits from the market so you need not worry about squeezing a bank visit enroute work. “The MCB Islamic Income Fund and UBL Islamic Sovereign Fund are two good options. They are low-risk, low-return and common amongst working women,” explains Basit.

There are also plenty of Bancassurance (Bank Insurance Model) options available wherein your bank and insurance company partner to offer you collective insurance and pension services.  Your wealth manager will continue to invest your money as your please with the added benefit of it being insured against unprecedented circumstances like loss or even death. You will have to pay a monthly or annual insurance premium which will be returned to you at the end of the insurance term as a lump sum. Terms may last up to ten or 20 years. The First Woman Bank (FWB) of Pakistan offers three popular Bancassurance plans, namely the Sada Bahar Plan, Three Payment Plan and Endowment Plan. “These offer security and also help housewives earn,” says Alisha Ali*, manager at FWB. “Real estate is also a good option for women,” she adds. “The rent I receive on my property is a great source of income!”

Businesswomen and entrepreneurs

Surprisingly, businesswomen are often subjected to gender bias by banks and denied finance for their work. Oftentimes, they are offered higher interest rates, short-term borrowing or required to collateralise a greater proportion of their loans. “But FWB provides stringent borrowing services to women,” says Alisha. “The Prime Minister’s Youth Business Loan is ideal for small start-ups, with a charge of 8% and amount limits going up to Rs 200,000. The Micro Loan Scheme is ideal for women in rural areas, offering loans from Rs 5,000 to Rs 100,000 at extremely low mark-ups.”

Single mothers and widows

If you are separated, divorced or widowed and solely responsible for earning for your children, you need to be extra careful with money. Not only must you cater to their education and marriage but also plan your post-retirement life. You have to plan long-term and so, long-term is how you should invest.

“Gold is very viable in the long-run,” suggests Naila Badar*, a financial analyst at Meezan Bank. “As prices are usually rising, investing in gold is safe and convenient as opposed to holding it in physical form. You need not worry about security or quality of the gold, etc.” Currently, gold is around Rs 43,000 per 22K.

Much like gold, real-estate prices are also escalating but purchasing property can be tiresome and risky. Nonetheless, it allows you to pay for investment in instalments, sell it off anytime or rent it out and earn a substantial amount. “I save tremendously on the rent I receive,” admits Naila, offering her own personal experience.” All that is required is for you to locate a reliable estate agent and browse property options.

However, perhaps the simplest way for single mothers is to open a savings account and build an emergency fund for yourselves. “Savings accounts at Allied Bank offer a seven percent interest rate,” informs Saqlain. “Our Plus Deposits Scheme also offers guaranteed fix returns with rates of eight to 10 percent.

Alisha proposes FWB’s National Savings Scheme for single breadwinners saying, “Government securities and bonds offer higher interest rates while keeping your money secure.” Other options you should look into include the Behbud Scheme, designed specifically for widows and senior citizens over 60 years of age. This offers a monthly profit of Rs 1,170 on every Rs 100,000 that you invest. This way, the profit rate works up to 14.04% per annum.

It is important to remember that investment is a life-long process you must research thoroughly before making a decision. Basic risk theory suggests one should try and diversify their portfolio as much as possible to spread the risk of loss. Once you have invested, be sure to track your money throughout to avoid incurring a loss or embezzling from your advisor.

*Names have been changed to protect privacy

Committee parties

A large number of Pakistani women save by hosting committee parties with their friends and family. Members of the ‘committee’ meet at regular intervals to pool in a specific amount of cash which goes to the host of the party. Each member hosts the party on a rotational basis and must await their turn through the year. Not only does this allow the host to acquire a lump sum amount in one day, committee parties are also a great way to bring your loved ones together for a meal or two.

Before you invest...

Profitable investing is virtually impossible without understanding the concept of interest rates. Simply put, interest rates are the cost of money — the price you will pay should you borrow money or someone borrow from you. As the economy hums along, interest rates fluctuate. Lower interest rates make way for cheaper borrowing, so individuals like yourself, banks and the corporate sector are more likely to invest. However, if interest rates rise, investment will decline as it will be more expensive to take out a loan. Changes in interest rates affect different investments differently: some stock prices may decline as companies pay more for their loans, leading to lower profits. Rising interest rates decrease bond prices while falling rates drive them up. Not to mention, cheaper borrowing will afford cheaper loans and more money for you to invest in the first place.Therefore, it is crucial that you stay mindful of the prevailing interest rates before you jump into an investment!

Published in The Express Tribune, Ms T, September 28^th, 2014.