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Fintech to Expand Financial Inclusion in Pakistan
About 100 million Pakistani adults lacked access to formal and regulated financial services as of 2016, according to a World Bank report on financial inclusion. Only 2.9% of adults in Pakistan had a debit card, and only 1% of adults used them to make payments. Just 1.4% of adults used an account to receive wages and 1.8% of adults used it to receive government transfers in 2014. Since then, Pakistan has been leading the way in South Asia in digital finance and branchless banking.
According to the latest State Bank statistics on branchless banking (BB) sector, mobile wallets reached a high of 33 million as of September 2017, up 21% over the prior quarter. About 22 percent of these accounts – 7.4 million – are owned by women, up 29% in July-September 2017 over previous quarter. A McKinsey and Co analysis shows that adoption of financial technology (fintech) can help dramatically increase financial inclusion in Pakistan.
Karandaaz Pakistan , a non-profit organization, set up jointly by UK’s Department for International Development and Bill and Melinda Gates Foundation, is promoting financial technology in the country. Finja and Inov8 are among the better known fintech startups in the country. Chinese e-commerce giant Alibaba's Ant Financial's recent entry in Pakistan is creating a lot of excitement in Pakistan's fintech community.
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Financial and Digital Inclusion in Pakistan. Source: Brookings Institution |
Importance of Financial Inclusion:
Access to regulated financial services for all is essential in today's economy. It allows people and businesses to come out of the shadows and fully participate in the formal economy by saving, borrowing and investing.
Those who lack access to regulated banking services are often forced to resort to work with unscrupulous lenders who trap them in debt at unaffordable rates. Such loans in extreme cases lead to debt bondage in developing countries.
Financial inclusion is good for individuals and small and medium size businesses as well as the national economy. It spurs economic growth and helps document more of the economy to increase transparency.
Status of Financial Inclusion in Pakistan:
About 100 million Pakistani adults lacked access to formal and regulated financial services as of 2016, according to a World Bank report on financial inclusion. Only 2.9% of adults in Pakistan had a debit card, and only 1% of adults used them to make payments. Just 1.4% of adults used an account to receive wages and 1.8% of adults used it to receive government transfers in 2014. Since then, Pakistan has been leading the way in South Asia in digital finance and branchless banking.
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M-wallets Growth in Pakistan in millions. Source: Business Recorder |
Mobile wallets, also called m-wallets, are smartphone applications linked to bank accounts that allow users to make payments for transactions such as retail purchases. According to recent State Bank statistics on branchless banking (BB) sector, mobile wallets reached a high of 33 million as of September 2017, up 21% over the prior quarter. About 22 percent of these accounts – 7.4 million – are owned by women, up 29% seen in Jul-Sep 2017 over previous quarter. Share of active m-wallets has also seen significant growth from a low of 35% in June 2015 to 45% in September 2017.
“The benefits of digital payments go well beyond the convenience many people in developed economies associate with the technology,” says Dr. Leora Klapper, Lead Economist at the World Bank Development Research Group. “Digital financial services lower the cost and increase the security of sending, paying and receiving money. The resulting increase in financial inclusion is also vital to women’s empowerment.”
A McKinsey and Co analysis shows that adoption of financial technology (fintech) can help dramatically increase financial inclusion in Pakistan. Pakistan is ranked 16th among 26 nations ranked by Brookings Institution with an overall score of 69% in "The State of Financial and Digital Inclusion Project Report" for 2017. The Internet revolution is enabling rapid growth of financial technology (fintech) for increasing financial inclusion in Pakistan.
A McKinsey Global Institute report titled "Digital Finance For All: Powering Inclusive Growth In Emerging Economies" projects that adoption of financial technology (fintech) in Pakistan will add 93 million bank accounts and $36 billion a year to the country's GDP by 2025. It will also create 4 million new jobs and add $7 billion to the government coffers in this period.
McKinsey report says that "Pakistan has solid digital infrastructure and financial regulation in place and has even had some success in digital domestic-remittance payments".
Fintech Players in Pakistan:
There are a number of companies, including some startups, offering fintech applications for smartphones that are linked to bank accounts. EasyPaisa operated by Telenor Microfinance is already well established. Among some of the better known startups working to disrupt the financial services sector in Pakistan are Finja and Inov8.
China's e-commerce giant Alibaba runs a major global e-payments platform Alipay. It also owns Ant Financial which has recently announced the purchase of 45% stake in Pakistan-based Telenor Microfinance Bank.
Telenor Pakistan runs its own e-payments platform EasyPay which will likely link up with Alipay global payments platform after the close of the Ant Financial deal. Bloomberg is also reporting that Alibaba is in serious talks to buy Daraz.pk, an online retailer in Pakistan. These developments are creating a lot of excitement in Pakistan's fintech and e-commerce communities.
Alibaba and Alipay and other similar platforms are expected to stimulate both domestic and international trade by empowering small and medium size Pakistani entrepreneurial businesses and large established enterprises.
Karandaaz Fintech Promotion:
A key player promoting financial inclusion is Karandaaz Pakistan , a non-profit organization, set up jointly by UK’s Department for International Development and Bill and Melinda Gates Foundation. It is providing grants for a number of local initiatives to develop and promote financial technology solutions in Pakistan.
Karandaaz Pakistan is promoting Fintech startups in 5 areas of focus:
1) Access to Financial services
Credit Scoring Models, Formalize savings through need based products, Digital lending services, and Insurance
2) Payments
Retail payments solutions through QR code, Supply / Value Chain Digitization, Ideas around digitization of online payments and merchant payments
3) E-Commerce
Smoothening of on-boarding process, Enabling Escrow Accounts for a retail merchant, Alternate payment modes other than COD
4) Interoperability
Innovative ideas to address the lack of interoperability among m-wallets
5) Early stage ideas related to:
M-Wallet Use cases, Education of Financial Services through technology, Customer Engagement / Experience, Micro Credit, Digital Savings
Summary:
About 100 million Pakistani adults lacked access to formal and regulated financial services as of 2016, according to a World Bank report on financial inclusion. Only 2.9% of adults in Pakistan have a debit card, and only 1% of adults use them to make payments. Just 1.4% of adults use an account to receive wages and 1.8% of adults use it to receive government transfers in 2014. At the same time, Pakistan is leading the way in South Asia in digital finance and branchless banking.
According to the latest State Bank statistics on branchless banking (BB) sector, m-wallets reached a high of 33 million as of September 2017, up 21% over the prior quarter. About 22 percent of these accounts – 7.4 million – are owned by women, up 29% seen in Jul-Sep 2017 over previous quarter. A McKinsey and Co analysis shows that adoption of financial technology (fintech) can help dramatically increase financial inclusion in Pakistan.
Karandaaz Pakistan , a non-profit organization, set up by UK’s Department for International Development and Bill and Melinda Gates Foundation, is promoting financial technology in the country. Chinese e-commerce giant Alibaba's Ant Financial's recent entry in Pakistan is creating a lot of excitement in the country's fintech community.
Related Links:
Fintech Revolution in Pakistan
The Other 99% of the Pakistan Story
Pakistan's Financial Services Sector
Riaz Haq
State Bank of Pakistan issues NOCs to five applicants for establishing digital bank
https://www.brecorder.com/news/40220082
Central bank expects after commencement of operations, digital banks will promote financial inclusion by providing affordable/cost effective digital financial services to unserved and underserved segments
The State Bank of Pakistan (SBP) on Friday said that it has issued no-objection certificates (NOC) to five applicants for establishing digital banks in the country.
The following are the ones issued the NOC:
I) Easy Paisa DB (Telenor Pakistan B.V & Ali Pay Holding Ltd.),
II) Hugo Bank (Getz Bros & Co., Atlas Consolidated Pte. Ltd. and M & P Pakistan Pvt. Ltd.);
III) KT Bank (Kuda Technologies Ltd., Fatima Fertilizer Ltd. and City School Pvt. Ltd.);
IV) Mashreq Bank (Mashreq Bank UAE); and
V) Raqami (Kuwait Investment Authority through – PKIC and Enertech Holding Co.)
In January 2022, the SBP introduced a licensing and regulatory framework for digital banks.
“The Framework was the first step towards introducing full-fledged digital banks in Pakistan. The digital banks are expected to provide all the banking services through digital means without any need for their customers to visit the bank branches physically,” said the SBP.
Race to digital banking – final round
In response to SBP’s Licensing and Regulatory Framework for digital banks, the central bank received twenty (20) applications from a diverse range of interested players such as commercial banks, microfinance banks, electronic money institutions and Fintech firms by March 31, 2022.
“Further, a number of foreign players including venture capital firms already operating in the digital banking space also expressed their interest to venture into Pakistani market directly or in collaboration with local partners. The five (05) applicants were selected after a thorough and rigorous assessment process as per the requirements of the Framework.
Bank Alfalah launches QR payment solution with SnapRetail
“Applicants were assessed on various parameters that included fitness and propriety, experience and financial strength; business plan; implementation plan; funding and capital plan; IT and cybersecurity strategy and outsourcing arrangements, etc. Further, all the applicants were given the opportunity to present their business case to SBP.
“Going forward, each of these five applicants will incorporate a public limited company with the Securities and Exchange Commission of Pakistan. Afterwards, they will approach SBP for In-Principle Approval for demonstrating operational readiness and for commencement of operations under the pilot phase. Subsequently, they will commercially launch their operations after obtaining SBP’s approval.”
The SBP said it expects that after commencement of their operations, these digital banks will promote financial inclusion by providing affordable/cost effective digital financial services including credit access to unserved and underserved segments of the society.
Jan 13, 2023
Riaz Haq
HugoBank Appoints Atyab Tahir as CEO to Build a Digital Bank in Pakistan
https://finance.yahoo.com/news/hugobank-appoints-atyab-tahir-ceo-02...
Atyab Tahir brings over 2 decades of local and international experience in fintech and digital financial services to help build a digital bank in Pakistan
HugoBank expects to increase Pakistan's bank account penetration rate to over 80% and to open 34 million new accounts by 2027
SINGAPORE, March 27, 2023 /PRNewswire/ -- HugoBank, Pakistan's latest digital bank led by a Singapore Consortium, today announced the proposed appointment of Atyab Tahir as Chief Executive Officer, subject to the State Bank of Pakistan's fit and proper assessment. Following the company's incorporation, Atyab will set-up and lead HugoBank in Pakistan to offer digital banking services to people and small businesses across the country.
Atyab brings over 20 years of business experience and deep industry knowledge to drive HugoBank's mission in Pakistan. Prior to HugoBank, Atyab led Jazzcash and served as a country head for Mastercard. He has also held senior positions with Tameer Bank and HBL where he focused on innovation and growth. With his vast experience in banking and fintech in Pakistan, the Middle East and New York, Atyab brings the best of both industries complete with a rich understanding of the local market and its needs.
"I am thrilled to lead HugoBank at the beginning of its journey in Pakistan and am confident that our digital bank will catalyse financial inclusion and wellness for the people of Pakistan. I am excited to assemble a team to build a customer-centric bank focused on offering accessible, convenient, and secure digital financial services to underserved individuals and SMEs alike," shared Atyab Tahir, Chief Executive Officer of HugoBank.
HugoBank will promote financial inclusion and literacy in Pakistan, offering products and services at price points that are accessible to everyone. The consortium aims to help Pakistan to achieve an 85% bank account penetration within five years, up from the current 16.29%[1] and is expected to open 34 million new accounts by 2027.
Pakistan has one of the lowest credit adoption rates in the financial sector, with only 2.4% of its population having access to credit from formal financial sources and 53% of the country's 220 million population currently financially excluded. Recognising the challenges faced in Pakistan, HugoBank is committed to introduce its state-of-the-art financial platform that will provide customers with an easy and convenient way to safeguard their money. With HugoBank, financial inclusion and literacy will become more accessible, ultimately contributing to the economic growth and wellbeing of the country.
Led by Singapore's Atlas Consolidated, which owns and operates the fast-growing WealthcareⓇ and savings app Hugosave, HugoBank is a joint venture formed in partnership with The Getz Group and Muller & Phipps. It received its No-Objection Certificate by the State Bank of Pakistan in January this year.
David Fergusson, CEO of Atlas Consolidated said, "We are pleased to welcome Atyab Tahir as the new CEO of HugoBank. With his extensive experience and deep understanding of the market, we are confident that he will lead HugoBank in promoting financial inclusion and literacy in Pakistan and help improve the lives of millions across the country. We are excited to work with him to provide and share international best practices and platforms to drive a positive change in the financial landscape and client's Wealthcare®."
Mar 31, 2023
Riaz Haq
#Pakistan’s Abhi Issues First #Sukuk #Bond for a #Fintech in Region. #Karachi-based startup raised 2 billion rupees ($6.8 million). Demand exceeded expectations with subscriptions reaching twice the anticipated amount. #startup #technology
https://www.bloomberg.com/news/articles/2023-05-12/pakistan-s-abhi-...
Pakistan’s financial platform Abhi has raised the first-ever Sukuk bond for a fintech firm in the region, opening a new funding line for startups that have seen a slowdown in venture capital.
The Karachi-based startup raised 2 billion rupees ($6.8 million), an industry first for the Middle East, Africa and Pakistan region, said Omair Ansari, chief executive officer and co-founder. Demand exceeded expectations with subscriptions reaching twice the anticipated amount, he said in an interview.
May 11, 2023