Shamshad Akhtar: Building inclusive financial system in Pakistan
Speech by Dr Shamshad Akhtar, Governor of the State Bank of Pakistan, at the Financial
Inclusion Conference, DfID & HM Treasury, London, 19 June 2007.
* * *
A. Introduction
Supported by high and sustainable economic growth during 2000-2007 Pakistan has made
key inroads: poverty incidence has reduced by 10% down to 24%, per capita income doubled
to $925, and there has been steady progress in other Millennium Development Goals
(MDGs).
Turnaround and transformation in banking sector, supported by privatization and
restructuring and market oriented policies, has already shown visible results in broadening,
deepening and diversifying financial services in the country. However, the growth of financial
sector has, as yet, not penetrated across all segments of population and across different
regions. This is not unique to Pakistan as most countries have had to adopt explicit financial
policies and affirmative action to redress the inequities and deficiencies of financial system
which tend to disproportionately serve businesses and individuals with appropriate net worth
backed by assets and collateral or located in prosperous areas.
Recognizing this, the central bank of Pakistan has launched a broad based strategy for
enhancing access to development finance. In this paper, I propose to discuss the case for a
holistic and broad based strategy for financial inclusion in Pakistan to achieve desired scale
and sustainability. In doing so, I intend to first outline:
(i) Impact of financial sector reforms in deepening access to finance;
(ii) Identifying nature and intensity of financial exclusion; and finally
(iii) Discuss the key objectives, goals and principles and major elements of financial
inclusion strategy - The strategy is anchored on developing financial and socially
sustainable mechanism of credit delivery with particular focus on financially
excluded population and regions.
The central bank of Pakistan (the State Bank of Pakistan (SBP)) has now assumed a
coordinating and supportive role with the alliance of Government, private sector and
partnership with development assistance to evolve and implement the financial inclusion
strategy.
B. Impact of financial sector reforms in deepening access to finance
Over the last seven years, Pakistan's banking sector landscape has changed drastically.
Principally both ownership and management changed. Financial markets have been fully
deregulated. Together these measures resulted in remarkable quantitative and qualitative
change. Growth in bank assets, deposits and advances has been unprecedented.
Profitability is high, and nonperforming loans are at the lowest etc. Most notable has been
• Rise in private sector credit from Rs18 billion in FY00 to over Rs 400 billion in FY06
•
SMEs accounted for 17.4% of the total outstanding advances by December 2006
•
Consumer credit accounted for 12% of the total outstanding advances by December
2006 from virtually negligible levels
•
Rise in agriculture credit from under Rs40 billion in FY00 to Rs 168 billion in FY07
•
Housing loans rose from negligible levels to Rs70 billion by December 2006
•
Microfinance loans increased from about Rs3 billion in 2003 to over Rs. 10 billion by
December 2006
•
Aggregate number of borrowers has risen from 2.7 million borrowers in 2003 to
about 5.5 million by December 2006.
Also, now banks are extending their business focus from corporate to household sector.
About half of the borrowers have tapped consumer financing which is changing lives of low
and middle income households that can now access credit (Table 1).
Table 1. Distribution of Sector Lending
% Growth
31-12-2003 31-12-2006
over Dec 03-Dec 06
Amount
Number of in Million Number of Amount in Borrowers Amount
Sectors Borrowers Borrowers Million Rs.
Rs.
Corporate 17,743 606,500 25,740 1,269,564 45 109
SMEs 91,663 215,009 168,233 417,873 84 94
Agriculture 1,411,508 104,676 1,480,214 141,856 5 36
Consumer Finance 721,201 61,437 2,665,423 276,037 270 349
Mortgage Loans NA 4,114 24,313 49,134 - 1,094
Others 135,561 169,035 122,190 246,289 (10) 46
Microfinance Loans 315,000 3,150 997,778 10,743 217 241
Total 2,692,676 1,163,922 5,483,891 2,411,496 104 107
NA: Not Available
Source: SBP except microfinance numbers are from Pakistan Microfinance Network
C. Nature and intensity of financial exclusion
Despite the progress highlighted above, financial penetration in Pakistan is quite low.
Pakistan has the highest number of people per bank branch among regional countries except
Bangladesh (Table 2).
Table 2. Regional Comparison: Bank's Branch Penetration
Country Number of People per Branch
Bangladesh 22,348
India 15,864
Indonesia 11,845
Malaysia 10,208
Pakistan 20,450
Philippines 12,773
Singapore 10,954
Sri Lanka 14,551
Thailand 13,929
Source: World Bank and SBP calculations
Thus far, 37% of the adults have bank accounts; the number of borrowers, at 5.5 million,
constitutes only 3.5% of the population; there are only 171 deposit accounts per 1000 people
and 30 loan accounts per 1000 people. Agriculture and SME credit reaches only to 1.5 and
0.16 million borrowers1, respectively. Furthermore, outreach of documented microfinance
sector is 1.13 million as of March 2007.
Financial exclusion exists in all economies and markets, whether developed or developing.
However, the level and degree of financial exclusion is far more in developing and large
countries as both population and size of country introduces their own constraints and
challenges (Table 3).
Table 3. Financial Penetration: Rural vs Urban
Rural Urban Total
Population 67.0 33.0 100.0
Poverty Incidence (as estimated by GOP) 28.1 14.9 23.9
Bank Branches 33.0 67.0 100.0
Total population having bank accounts 6.0 37.0 17.0
Adult population (19+ years) having bank accounts * 14.0 75.0 37.0
Deposits (number) 25.0 75.0 100.0
Deposits (amount) 9.9 90.1 100.0
Advances (number) 17.0 83.0 100.0
Advances (amount) 7.1 92.9 100.0
*: this figure may be overstated due to multiple accounts.
Source: SBP and Economic Survey 06-07
In Pakistan financial exclusion manifests itself in different forms:
(i) Exclusion because of geographical constraints since a large proportion of population
e.g. almost 67% lives in rural areas and there are pockets of population residing in
difficult remote and disadvantaged terrain such as barani and arid areas and tribal
areas;
(ii) Exclusion because of lack of enabling environment at provincial level. For instance,
banks find it difficult to intermediate agriculture credit in provinces where there are
problems such as lack of suitable land records and weak law and order
enforcement. Similarly, these problems hinder other sectors including microfinance
institutions to increase their penetration which is highly desirable due to prevalence
of high headcount poverty.
(iii) Exclusion because of banking behavior and practices either because they are not
servicing a large segment of population or they rely on traditional modes of lending
which require collateral or documentary requirements or they impose prohibitive
transaction costs etc;
(iv) Exclusion because of poverty or illiteracy or cultural and language barriers as a
result of which population generally lacks awareness and understanding of financial
services and products;
(v) Exclusion because of lack suitability of products like current accounts, which do not
offer an overdraft and an easy route to borrowings; and
(vi) Exclusion because of regulatory barriers, such as the money laundering guidelines
requiring proof of identification which many poor and vulnerable people find difficult
to provide.
Financial inclusiveness is critical as 42% of Pakistan's population is under 15 years of age
and about 24% of the population lives below poverty line, both these segments can benefit
from economic empowerment. Apart from banks' loan pricing policy and lack of easy
availability, financial institutions are reluctant to venture into new areas as they do not have
the capacity to assess the demand and deliver their financial services. The lack of availability
of the faith based system of financial services, lack of alternate delivery channels and
financial innovation, inadequate database and information on borrowers, and weak
enforcement of contract etc. are some of the main stumbling blocks that prevent
inclusiveness of financial sector.
D. Pakistan - financial inclusive strategy
Objectives, goals and principles. Recognizing the overwhelming size and intensity of
financial exclusion in Pakistan, SBP in designing the second generation reforms for financial
services industry is placing high priority on developing and implementing an effective
strategy for financial inclusion. This section offers some perspectives on this strategy.
A key objective of the financial inclusion strategy of Pakistan is to support the Government's
target for halving the income poverty headcount by 2015 and to reduce eventually poverty to
a single digit. To realize this objective, the Government and the SBP has for sometime been
creating conducive policy, legal and regulatory framework across the board, while adopting
multiple approaches and modalities to extend its net of financial services to larger segment of
population.
Keeping these perspectives in mind, Pakistan has adopted a holistic strategy for empowering
and enhancing the capacity of poor to contribute and participate in economic growth. On one
hand, the Government is focusing on enhancing public investment in education and health
and a wide variety of poverty alleviation programs. On the other hand, the central bank has
been steering a broad-based policy framework for promoting inclusive financial development.
The principle thrust of the approaches and programs designed has been to shift emphasis
from directed and subsidized credit to adopting best practices and market based approaches
to promoting private sector in financial inclusion. Meanwhile, public expenditure is supporting
selective and targeted interventions to stimulate and catalyze action and nurture institutions
which leverage public: private partnerships to improve access to financial services for poor.
Most prominent e.g. is the support for the Pakistan Poverty Alleviation Fund (PPAF) and the
National Rural Support Program and the recent President's Rozgar Scheme that offers credit
to nations young and unemployed.
The PPAF is sponsored by the Government of Pakistan and funded by the World Bank and
other leading donors. The PPAF follows a model of public private partnership through lending
of wholesale funds to civil society organizations committed to community outreach programs
for enhancing income and economic welfare of the disadvantaged people. Specifically, the
PPAF provides funding for projects that help generate income, improve physical, social
infrastructure, and skills of the vulnerable. On February 28, 2007 the PPAF had a resource
base of US$ 826.17 million (Rs. 49,560.2 million)2.
The NRSP is the largest Rural Support Programme in the country in terms of its outreach,
staff and development activities. It is a not-for-profit organization with a mandate to alleviate
poverty by helping people to harness their potential and undertake development activities in
Pakistan. It has presence in all the four Provinces including Azad Jammu and Kashmir. The
NRSP, with more than half a million poor households organized into a network of about
29,000 Community Organizations (COs), manages one of the largest micro-credit portfolios
in Pakistan, with 282,421 active loans as of March 2007; it holds 25% of the microfinance
market. The NRSP provides various financial services to the members of COs in rural areas
to help them implement their Micro Investment Plans (MIPs)3, including Micro Credit, Micro
Insurance and savings products.
The National Bank of Pakistan, largest nation-wide bank, is offering small loans to
unemployed and poor to finance purchase of auto rickshaws, setting up utility stores under
franchise of the Utility Corporation, and setting up public call office etc. Interest on these
loans is fixed at 12%: 50% of interest charges are to be borne by the Government and the
remaining 6% by the borrowers. The Government will pick up first 10% of all losses and
share credit risk insurance. External and internal verification of borrowers, references and
guarantees are handled by ICIL - a representative firm of Dun and Bradstreet. This scheme
is anticipated to deliver over 5 years period about Rs105 billion (US $ 1.74 billion). Since its
launch this year, the scheme has delivered Rs2 billion to about 22,136 borrowers4 .
Recognizing Pakistan's context, and drawing from other country experiences, it has to be
acknowledged upfront that financial exclusion can only be tackled effectively:
(i) If it is well conceptualized, well grounded and well integrated in the overall financial
sector policy framework;
(ii) If it is backed by absolute political commitment and cooperative stance of the
federal, provincial and local government and relevant sector agencies to create a
healthy and conducive environment for financial intermediation at the lower end of
population where risks are of different nature;
(iii) If financial institution recognize their corporate social responsibility and work towards
financial deepening and credit diversification that is key to financial inclusion as well
as to managing banks' health and its systemic risks;
(iv) If there is focus on provision of holistic financial services, whereby savings
mobilization is perceived critical and integral to establishing the client on a sound
footing and clients have collateral free access to financing with adequate provision
for risks mitigated through credit enhancement mechanism and insurance; and
(v) Facilitating reliable and secure payment between different parties.
Major elements of financial inclusion strategy. Drawing from considerations highlighted
above, Pakistan's financial inclusion strategy is broad based and flexible that aims to
encourage partnership and social cohesion and mobilization with the objective of
empowering and nurturing clients and their businesses. It engulfs all segments of population
by offering them holistic and multiple services and products.
Anchoring and weaving these objectives, goals and principles, the SBP and the
Pakistan Microfinance Network (PMN) have developed a far reaching Microfinance
Strategy that is one of the principal driver's of financial inclusion strategy5. In April
2007, the Government has approved this Microfinance Strategy and a time bound Action
Plan has been prepared to launch its implementation. Presently, the institutional framework
of MF industry includes a set of (i) retail providers such as six MFBs (licensed only recently
by central bank), (ii) the national and provincial rural support programs and charitable or
specialized NGOs, (iii) the wholesale apex institution, the principal being the PPAF which
relies on donor and government financing support to refinance community organization
whose number has reached 60,000; and (iv) the NGOs and the cooperatives - later are now
mostly closed except for one principal operator, the Punjab Cooperative Bank that has
managed to be proactive but it relies on SBP credit lines (quite an unsustainable approach)
and provincial government support and has to be eventually restructure to be more financial
viable.
Commercial banks have selectively provided liquidity support to few MFIs. In the last six
years, MF industry and beneficiaries have grown (Table 4). Currently the network of MF
providers is 239 branches servicing about 1.1 million clients with about Rs5.6 billion portfolio.
Among MF providers, Khushali Bank alone accounts for 47% of this network. However,
MFloan portfolio is higher close to Rs73 billion (as of December 2006) if one adds to MF
providers programs all the agriculture, National Bank of Pakistan and other banks' small and
micro lending.
Table 4. Growth in Microfinance (numbers in thousand)
2007 up to
Year 1998 1999 2000 2001 2002 2003 2004 2005 2006
March
Borrowers 65 64 67 100 210 315 450 609 998 1130
Savers 240 280 622 915 880 915 1000 1200 1400 1510
Source: Pakistan Microfinance Network
Even though industry has grown and is quite vibrant, its limited scale (both in terms of
beneficiaries and region) and impact has recently necessitated stock taking of where we
stand and how to transform this sector to meet more aggressively and swiftly country wide
requirements. The MF-strategy advocates enhancing scale of MF operations to serve 3
million within 3 years for it to be henceforth extended eventually to 10 million expeditiously.
MF ought to provide multiple services and products and sector financing and should include
support for the un-banked poor but also those above it.
The strategy aims to encourage a change in vision and mission of MF operators from being
charitable and social service providers to sustainable financial service providers. To achieve
scale, the strategy underscores that all MF business need to position themselves for
scalability and sustainability by augmenting their reach and developing alliances with other
players, provision of wide ranging financial services and nurturing both financial and social
sustainability. In addition, the strategy aims to unleash the potential of existing MF providers,
while enhancing competition by allowing entry of new international players, exploiting greater
synergies between public: private institutions and retail-wholesale providers, developing
framework for piloting credit unions and developing basic infrastructure for enhancing
capacities of industry and borrowers as well as developing credit information bureau.
The strategy further advocates developing effective synergies between the commercial
banks and the Microfinance Banks (MFBs) and between the Microfinance Institutions
(MFIs)/Nongovernmental organizations (NGOs). This interdependence and integration is
perceived critical to encourage commercial banks to provide the desired liquidity to MF
providers - which is absolute necessity until deposit mobilization at MF level generates
required surpluses. Alliance between formal institutions and MFIs/NGOs is intended to help
them access client and achieve desired degree of social mobilization - not a forte of banks.
The strategy recognizes that MF providers alone cannot reach the large proportion of poor
and low income so proper synergies and partnership among financial institutions will facilitate
swifter extension of financial services to the small and micro borrowers across different
sectors. The MF providers would have to reorient the way they do business and provide
different products including loans, saving and insurance instruments as well as structure
safety net schemes. More specifically, MF providers would need to develop capacities to
deliver credit to different sector such as agriculture, housing etc.
Furthermore, strategy recognizes that MFIs and MFBs would need to develop commercially
viable and financially sustainable operation. This requires appropriate availability and
blending of financing: equity support, debt raising mechanisms, leveraging funding through
credit enhancement, and exploiting more aggressively resource mobilization from depositors.
Furthermore, MFIs need to enjoy flexibility in charging interest rates that fully recover costs -
administration and supervision as well as risk perceptions - public acceptability of this is
critical as eventually financial services would be priced effectively with enhanced
competition. To realize these goals, Government is
(i) Introducing level playing field among the MFBs by bringing all MFIs under one
legislative and regulatory framework - this requires bringing the Khushali Bank, the
largest branch network, established under special ordinance and supported by
subsidized funding that distorts level playing field in the industry.
(ii) Encouraging MFIs to upgrade themselves to a full-fledged bank by offering a 5
years tax break to MFBs.
(iii) Developing special funding/financing arrangements for MFIs which have potential
for exploiting scale but cannot do so without resource constraints. MFIs (such as
NRSP) are facing difficulty in extending their reach in difficult terrain such as barani
and un-irrigated areas and rural areas without effective liquidity to conduct business.
To address this issue, central bank is exploring mechanisms to encourage
relationships and alliance between the commercial banks and MF providers with the
objective of former providing the desired level of liquidity with and without credit
guarantees or acquiring MFI to nurture such institutions. At the same time, the
NRSP will be transforming itself from MFI to MFB and is working on a strategy to
restructure with the objective of achieving scale in its operations.
(iv) Facilitating entry of new international players such as BRAC, Shore bank, etc. and
encouraging setting up a Build-Own-Trust Model supported by the Grameen Trust.
(v) Encouraging restructuring of First Women Bank Ltd. to enhance its role in serving
microcredit requirements of women. Restructuring would involve bringing in strategic
partner in this bank and encouraging enhancement of its capital to allow it to
leverage itself properly for augmenting its outreach.
(vi) Enhancement of capacities of PPAF to offer credit enhancement to leverage
resources for microfinance industry and supporting other industry-wide initiatives.
(vii) PMN further positions itself to serve as a think tank, advocacy group and collate
trends and analysis of industry and has played an instrumental role in steering the
industry and strategy.
Central bank's special initiatives to enhance outreach and scale
SBP's Annual Branch Licensing and Basic Accounts Policy. SBP has introduced the
Annual Branch Licensing Policy with a road map for 2008 and beyond. This policy requires
commercial banks with 100 branches or more to open at least 20% of their branches outside
big cities and set up branches in Tehsil Headquarters where no branch of any bank exists.
Table 5. Proportion of Rural vs Urban Bank Branches
% age of Rural % age of Urban Total
Branches Branches Branches
Foreign Banks 0 100
49
Five Big Banks 41 59
5,448
Private Banks 7 93
1,575
Islamic Banks 0 100
93
Specialized Banks 33 67
539
Source: SBP
The branch licensing policy has had a significant impact on braches of the five large banks
with more than 40% branches in the rural areas (Table 5). In contrast, the private banks,
despite having a considerable number of total branches are lagging behind in rural branches
leaving much to be improved. This could be due to the fact that private banks mostly
comprise of smaller banks with less than 100 branches. Similarly, Islamic banks and foreign
banks will have to open rural branches once they reach the threshold of 100 branches.
In addition, SBP has allowed banks to establish sub branches, booth and service centre of
commercial banks in inner regions where it is costly to maintain a full fledged branch. These
sub branches can be managed by skeleton staff and can act as an extended arm of the near
by branch for performing limited banking functions such as deposits, withdrawals, issuance
of demand draft, telegraphic transfer etc. and also facilitate payment of home remittances to
their beneficiaries.
Since November 2005 all commercial banks operating in Pakistan are required to offer Basic
Banking Accounts (BBA) to facilitate and provide basic banking facilities to the low income
people in Pakistan. A typical BBA can be opened with a minimum deposit of Rs1000 carrying
no fee, no limit of minimum balance and full ATM facility. As of March 2007, about 120,000
BBAs were opened.
Hesitation in mobilizing BBAs has been there as the banks complain of high transaction
costs associated with these accounts. While BBA is relatively a new product, the current and
savings account are almost 47% of total deposit base and remain sticky despite the low
returns offered by the bank. Central bank has introduced substantive competition by allowing
entry of new and foreign banks and it is likely that this competition will eventually drive
interest rates up for small depositors over time and would serve in turn as an incentive to
clients to bank more aggressively. Special products offering different schemes for car loans
and insurance etc. are already attracting urban small depositor, who were earlier out of the
net, to bank.
Promotion of Post Office network. SBP and Post Office (PO) are exploring how 12,343
field office network of PO can be used to provide financial services by encouraging alliances
between MFBs/MFIs and PO. So far, PO manages over 4 million saving accounts with 70%
of such accounts holding savings below Rs10, 000 (or $165). PO is now working with a few
MFBs/MFIs to develop viable arrangements for PO to sublet premises to MF providers or to
partner with them to launch wide range of financial services. PO recognizes that it would
have to rely on MFIs for financial intermediation, though local POs have over the years
developed an understanding of local communities that they service.
SBP's Sector Prudential Regulatory Framework catalyzed to service under-served.
Dedicated prudential regulations have been developed for specific sectors. In 2001 SBP
issued Microfinance Ordinance and supportive Prudential Regulations as well as guidelines
to allow setting up of national and regional MFBs and now 6 national level MFBs are
licensed. The MF ordinance has been amended last year to ensure that minimum loan size
being offered by MF be raised to Rs150,000 to allow providers to service MF business
requirement and now MF are allowed to engage in remittances businesses. Banks are
allowed to lend to small and medium enterprises clean i.e. without collateral up to Rs3 million
and now SBP is considering broadening it to include small enterprises.
In parallel, there are several initiatives to extend financial services to small borrowers. These
include: SBP's-SME financing Strategy that advocates promotion of Credit Guarantee
Schemes and Venture Capital Funds, establishment of SME training centers and capacity
building of banks' SME Loan Officers, SME Credit Risk Scoring and Competitiveness
Benchmarking and Triennial Survey on SMEs to estimate their demand for the financing. In
tandem, SBP has introduced Prudential Regulations for Agricultural Financing and
Guidelines for Livestock and Fisheries
financing; estimated agricultural credit demand for
complete value chain from production to export by the farmers/growers; and simplified and
standardized loan documents, and offered three years revolving credit scheme with one time
documentation and automatic renewal on annual cleanup of principal plus markup for
production loans to farmers. SBP has further allowed banks to finance against
market/realizable/forced sale value of the agriculture land, urban properties, gold/silver
ornaments, etc. and also against two personal sureties (up to Rs.500,000 - US$8,333) in
addition to passbook of the land etc. These initiatives have contributed significantly in
enhancing formal institutional agricultural credit disbursement for small borrowers.
Besides allowing commercial banks and removing caps on house loans and bank based
exposure limits for housing finance, the House Building Finance Corporation (HBFC) is being
corporatized to deal with the back log and demand for new housing units in Pakistan,
estimated at 19.3 million including back log of 6 million low income housing units. HBFC, with
support of the Government, has announced to promote low income housing on sound
banking principles.
Islamic banking, which carries appeal for Shariah compliant clients, is being promoted to
cater for underserved sectors such as SMEs, agriculture sector and micro enterprises
through Shariah compliant products. Besides six full fledged Islamic Banks and permission to
conventional banks to render such services, a full fledged Islamic Microfinance Banks (IMFB)
would be encouraged also.
The central bank is working with the Government to develop adequate and
to support lending to MFIs which
commercially viable credit enhancement mechanism
have now developed their niche and have potential to enhance their outreach but are
constrained because of lack of funding or financing for capacity support. Similarly there is
need for credit guarantee mechanisms to support evolution of small businesses. For these
areas it is arranging for technical support from international service providers such as
Grameen Foundation of USA will help in development of credit enhancement mechanism
and establishing a poverty monitoring mechanism to assess the credit delivery to vulnerable
population.
The central bank is encouraging promotion of insurance products to support micro
and small lending. For instance, SBP plans to play a proactive role in development of
Islamic micro-insurance products and has already worked with private sector insurance
companies to develop non collaterized lending and crop loan insurance products which
should help leverage MFBs and other institutions interest in supporting agriculture lending for
small borrowers.
The central bank has promoted electronic banking which should lay the foundation for
country wide connectivity of financial institutions. Already about half of the bank
branches are now engaged in electronic fund transfer which is eventually to be supported by
the legal coverage provided by the Payment and Electronic Fund Transfer Act, 2007. In
parallel, efforts are underway in collaboration with ADB to launch mobile banking. The central
bank has already laid out a Policy Paper on Regulatory Framework for Mobile Banking in
Pakistan for public comments. Under this, central bank will promote both branchless as well
as bank and non-bank focused models of mobile banking.
The central bank has restructured itself in September 2006 and established a full
fledged Development Finance Group. This is now headed by an Executive Director - who
is a important member of the Banking Cluster, with independent sector finance departments
which steer and help implementation of policy, legal and regulatory framework for Small and
Microfinance businesses, agriculture and rural credit, housing and infrastructure finance and
Islamic finance. This Group has been entrusted with the Mission to steer and implement the
financial inclusion strategy, launch development programs and analyze and monitor issues
and progress in access to development finance in collaboration with the stakeholders and
Government agencies. The Banking Services Corporation - a subsidiary of SBP - is now
being restructured to engage through Local Advisory Committees to disseminate the financial
inclusion architecture at field level and to provide us feedback on problems of development
access while raising awareness and understanding of financial solutions offered by various
providers and providing feedback on the problems public faces.
The central bank with the support of its two principal training institutions i.e. National Institute
of Banking and Finance and the Institute of Bankers Pakistan is implementing financial
literacy and capacity building for financial institution and public to leverage available financial
services while building momentum for them to appreciate that pricing of formal delivery
channels while high would be competitive vis-à-vis informal and other lending opportunities
they may have.
E. Conclusion
In conclusion, given the nature and intensity of financial exclusion in Pakistan, we can ill
afford to delay sound and quick implementation of the financial inclusion strategy that has
been developed by the central bank with support of all stake holders. It is critical to recognize
that this broad based strategy aims to unleash the potential of both public and private sector
financial intermediaries and agencies and channel them more coherently and systematically
to launch an all round aggressive campaign on financial inclusion.
The central bank on its part is not in business of directing or supporting itself financial
intermediation but is in the business of performing its public role and responsibility leveraging
policy, legal and institutional standing and strength to act as a principal agent for motivating,
mobilizing and using moral suasion with industry to serve the people. Its role is more to
empower the industry and its agents and to empower public through financial literacy to
position themselves to access wide range of financial services in a cost effective and efficient
manner. Political commitment, the passion and power of