Fair Finance Asia - Sida - Pakistan Prog The Fair Finance Asia Program (FFA) envisages to reduce the negative impact of national and cross-border bank investments in Asia on human rights, the environment and climate change, and to increase adequate financial services for pro-poor, inclusive economic development. The goal is to establish a sustainable financial sector in Asia, with financial sector institutions operating at national and regional level being more transparent and accountable and adhering to Economic, Social and Governance (ESG)-criteria. FFA is funded by SIDA.

In Pakistan, this project is led by Indus Consortium (IC), which envisions a democratic and equitable society where all citizens enjoy equal economic, cultural and political rights. Indus Consortium works for local communities to enhance their resilience and participation in development.

In Pakistan, major decisions around investments are made by the global head offices of the IFIs. 90% of the total investment/ loaning goes to Pakistan government with 100% sovereign secure loaning whereas banks exclusively deal with clients and are often responsible to contributor to fuel in inequality. About 100 million adults in Pakistan don’t have access to formal and regulated financial services. This number accounts for about 5% of the world’s unbanked population, which stands at 2 billion

Having a formal and regulated transaction account opens access to other financial services, such as savings, payments, insurance and credit, all of which can help people better manage their lives and reduce poverty. However, only 20% Pakistanis have formal bank account (including digital mobile accounts) whereas only 5% women are included in the financial sector. We see Micro, Small and Medium Enterprises (MSME) are heavily under-financed as more of the lending goes to government and large scale industry whileSMEs are receiving only a small chunk of 7 % of total lending, given the fact that there are total 3.2 million SMEs registered in Pakistan, however approximately 188,000 SMEs are getting loans as per banking books . These evidences suggests that common citizens, SMEs and small scale private sector is lacking financial inclusion where more than 50% banking investment directly goes to government through T-Bills . Lending priorities seem to exhibit extreme consumer liabilities instead of providing sustainable development i.e., Corporate insurance, farmers investment insurance etc as there is high interest ratio in Pakistan i.e., 7% at current, however before Covid pandemic it was at 13%. Adeeper analysis suggests the primary motive for investment is to transfer finances through legalmeasures to oversees tax heavens such as the Cayman Island, Singapore, Dubai etc.

Environmental, Social and Governance (ESG) refers to investment standards, which socially conscious financial institutions must apply to screen potential investments (financing). Environmental regulations refer to criteria in place for financial institutions to minimize the environmental risks by promoting environmental friendly financial regulations for banks and non-bank financial institutions. Social criteria for investment refers to relationship with employees, suppliers, customers and communities. Governance criteria refers to corporate governance including leadership, executive pay, internal controls, audits and shareholder rights.
The State Bank of Pakistan is not only the central bank but isalso the regulator of commercial and microfinance banks in Pakistan. Likewise, the Securities and Exchange Commission is the regulator for non-bank financial institutions including the investment banks.