ashraf mahmood wathra : the importance of financial inclusion in pakistan speech by mr ashraf mahmood wathra, as acting governor of the state bank of pakistan, at the bank alfalah mobile commerce conference 2014, karachi, 13 march 2014. * * * assalam - o - aalaikum and good morning it is my great pleasure to join you at the international conference & exhibition on mobile commerce in pakistan, and share with you some of my thoughts on this important subject. i must congratulate the organizers and sponsors for their efforts in bringing together the stakeholders of mobile banking eco - system at one platform. being a regulator of banking sector, sbp believes that financial exclusion is hindering our fellow citizens in availing economic and business opportunities. today, there are an estimated 2. 5 billion adult people worldwide who do not have access to formal financial services. according to world bank ’ s global findex survey, almost 80 percent of those living within incomes of less than $ 2 per day are financially excluded. pakistan is a country of over 180 million people living in geographically diverse areas. our branch network of almost 12, 700 is insufficient to serve the millions of unbanked masses. banks operating in pakistan are hosting only 35 million customer accounts including 3. 5 million accounts opened by branchless banking providers. despite phenomenal spread of banking business in pakistan, we have a long way to go to achieve digital financial inclusion in the country. given the complexities and challenges of limited financial access in the country, state bank of pakistan has adopted a multi - pronged and long - term strategy to address financial exclusion through structured policy & regulatory actions, and market - development interventions. our program initiatives have been catalysing the market developments and fostering market ecosystem to especially promote innovative ways of doing banking business. as we all know that people around the world increasingly use technology and communication networks to live, work, socialize and remain informed and entertained through the use of online services via personal devices like pcs, smartphones and computer tablets. therefore online and other - off - branch modes of doing banking transactions have reduced the hassle of visiting a conventional bank branch to a considerable extent. ladies & gentlemen, pakistan is amongst the pioneers of mobile / branchless banking in the developing world. our branchless banking framework and models have achieved worldwide recognition and remarkable success in a short span of four and a half years. this could not have been possible without an effective and enabling regulatory regime, dynamic

would add $ 350 million to the country ’ s foreign exchange reserves. the adb has so far provided $ 333 million. the country has been able to reschedule $ 2. 8 billion which it had to pay to external creditors this year. despite this relief, it maybe pertinent to mention that the country still had to pay $ 4 billion in cash foreign exchange out of its own resources to service its external debt. the pakistan development forum gave a resounding endorsement to the reforms pakistan is undertaking. credit rating of pakistan has improved. overall, there is a perceptible and positive change in pakistan ’ s standing with the international financial community. this is, therefore, the genesis for the improved perception of external donors about pakistan ’ s economy. in addition to the imf program implementation there are some key reforms this government has embarked on its own – survey and documentation of the economy to widen the tax net and improve tax compliance, devolution of power to the grass root level whereby the common people are empowered and the old bureaucratic system is dismantled ; accountability of those who had looted national wealth in the past ; recovery of bank loans from defaulters, utility bills and evaded taxes. these measures, on the top of others implemented as part of the imf program, have created their own dynamics and shaken the foundations of the rent seeking culture prevalent in the economy for such a long time. but the sad part is that the rent seekers, who were keeping the overall economy buoyant have withdrawn from the scene. consumption expenditures emanating from the rent - seeking class are much lower than what they used to be in the past. their investment activities have come to a halt. most of them are trying to find safe havens abroad for their wealth. while the group of external donors is pleased that the country had taken all the tough decisions which were postponed by the previous governments for such a long time the same decisions and other measures adopted by the government, have created hardships domestically for several classes of economic agents. what were the expectations of the various domestic classes? it may be pertinent to recall that the expectations from the present government were quite high as the country had faced an atmosphere of uncertainty and despondency for a long time and the military was considered as a savior of the economy. the urban educated unemployed felt that new employment opportunities will be created to absorb them. the fixed income groups thought that the wages, salaries and pensions frozen since 1994 will be raised