to microfinance ( mf ) providers to top and middle tier microfinance banks ( mfbs ) and microfinance institutions ( mfis ) for key investments in hr, it, product development, risk management systems, business plans and branchless banking development. the microfinance credit guarantee facility to link microfinance with financial markets for mobilization of wholesale commercial funding through partial guarantees. similarly, the financial innovation challenge fund ( ficf ) for grants to innovative projects and testing new markets to lower cost of delivery, enable systems and procedures to be more efficient and provide new ways of meeting the larger demand for financial services. and the improving access to financial services fund which is supporting today ’ s program. these are mostly supply side interventions aiming to increase financial services by removing bottlenecks and have raised financial inclusion to a certain extent. however, what has been missing is a demand side solution – a program to impart financial education and awareness to consumers. this recognises that the very low level of financial awareness and confidence of financially excluded groups remains a strong barrier to their access and use of financial services. in addition, there are risks involved in creating new opportunities for consumers if the consumers are not proficient at making financial decisions. therefore, going forward, sbp considers financial literacy as an integral part of the financial inclusion strategy. financial literacy has assumed greater importance in recent years for both developed and developing countries, therefore, best practices in this area are still evolving. however, synthesizing from the oecd ’ s high level principles for financial education, some best practices are : first, the financial education program must involve key players from the beginning. this may take a lot of time and effort due to slow decision making process but will ensure success of the program in the long - run. in particular, the consumers must be consulted to understand bis central bankers ’ speeches their preferences and identify appropriate curriculum and dissemination channels and tools. therefore, financial education surveys must be conducted to appropriately identify the needs and to set a baseline for program monitoring. this will also help identify teachable moments for low income groups that may typically occur around the receipt of money, the need for credit etc. second, it is better to implement and earn quick wins to generate positive energy such as starting from a pilot launch initially before going national to gain the buy - in of all the stakeholders. third, the program design should be flexible enough to enable diverse stakeholders to join - in and create synergies. this

ishrat husain : seminar on anti - money laundering welcome speech by mr ishrat husain, governor of the state bank of pakistan, at the anti - money laundering seminar, islamabad, 29 - 30 march 2005. * * * mr. prime minister, distinguished guests, ladies and gentlemen : good morning. i am honoured to welcome you all to this international seminar on anti - money laundering. i am grateful to the prime minister for taking time out of his busy schedule and inaugurate this seminar. i would like to extend a special welcome to the foreign visitors and wish them a pleasant and productive stay in our country. the topic of the seminar is of great importance in today ’ s world. one of the main objectives of this seminar is to discuss the core issues, which significantly involve financial sector in the fight against money laundering and terrorist financing. i hope the seminar comes up with practical suggestions for effective tackling of money laundering and terrorist financing. while the speakers would be highlighting the technical aspects of money laundering and terrorist financing, i would like to mention a few general observations about the menaces. the process of laundering dirty money by way of placement, layering and integration is harmful for each and every segment of the society. its ill effects on society, institutions and governments have been enormous. the tainted money adversely affects productive sectors of the economy in multifarious ways. the financial sector is particularly hurt if used for laundering of ill - gotten proceeds. the adverse consequences for financial institutions include reputational risk, operational risk, legal and concentration risks. it costs the financial institutions, in the following ways : • loss of profitable business • liquidity problems through sudden withdrawal of funds • termination of correspondent banking facilities • investigations costs and fines / penalties • assets seizures • loans losses • use of senior management ’ s time in doing damage control. • declines in the stock value of the financial institution concerned. society, as a whole, bears the costs of money laundering in multiple ways. unchecked money laundering enables criminals to enjoy the profits of their crimes who in turn commit more crimes. when there are more frauds and robberies in banks, depositors will receive less return on their deposits and will have to pay high rates on their loans. when public projects are inflated by corruption, citizens have to pay in the form of more taxes. these acts further distort equitable distribution of wealth and, hence, increase in the incidence of poverty. terrorism in its all forms