in urban and rural areas. awareness is growing that access to a wider set of financial services provides poor people with capacity to increase or stabilize their income, build assets and have much greater resilience to economic shocks. appropriate and affordable savings products, payment and money transfer services ( both domestic and international ) as well as insurance are all important. gender discrimination has excluded women who have toiled to provide and support financial needs through enterprising means but were stymied due to negligible access from the formal financial sector. bis central bankers ’ speeches at the same time, one billion people with mobile phones in the world do not even have a basic bank account. as the costs of information and communications technology shrink, the time is ripe to extend this technology to address financial exclusion. technological innovation impacts the cost and access equation – making it economically viable for financial service providers, to reach poor people, with a wider range of products and services. innovation also extends to new institutional approaches. increasing numbers of countries with large unbanked populations are pioneering policy and regulatory innovations that opens space for “ banking beyond branches ” with new approach to the delivery of formal financial services. this is allowing previously excluded customers the much needed access to an increasing range of basic financial services. pakistan has one of the lowest financial penetration levels in the world with 56 % of the adult population totally excluded, and another 32 % informally served. we are a country with a population of 180 million living in geographically diverse areas. mobile phone subscription has seen explosive growth in pakistan. in contrast, banking accounts are owned by approximately 30 million customers largely belonging to high income segments of the society. with a network of a little over 10, 500 bank branches, the coverage of branches is one of the lowest in the region. developing brick and mortar branches is a costly proposition. to encourage financial institutions to develop alternative delivery channels, sbp in 2008, introduced branchless banking ( bb ) regulations. the regulations are applicable to all commercial banks, islamic banks and microfinance banks in pakistan. these regulations have actually catalyzed in the deployment of a number of branchless banking initiatives that have a dual advantages : first, there is an enormous scope for expanding outreach, especially in the hard - to - reach rural areas. the emerging models relying on “ banking agents ” have greatly extended the distribution of financial services to the marginalized and deprived segments. second, alternative delivery channels promise significant cost reduction to institutions. due to these benefits, the expansion in the retail

the first line of defence relates to the fact that, in repo operations, as long as our counterparty meets its obligations, we don ’ t incur any kind of risk related to the collateral. assets held as collateral only constitute a guarantee, not a direct exposure. accordingly, related price decreases could only induce eurosystem losses if those decreases took place after the default of the counterparty. therefore, by only accepting financially sound counterparties in our credit operations we greatly limit the risks. financial soundness is a precondition imposed by the eurosystem on its counterparties to participate in monetary policy operations. the second line of defence in our credit operations is the eligibility requirements we impose for the collateral. eurosystem credit operations need to be guaranteed by adequate collateral, complying with minimum credit quality thresholds and other legal criteria and operational requirements. the minimum credit quality requirement in general corresponds to a bbb – rating, although in some cases the rules applied may differ. regarding abss, an asset class that many analysts have blamed for being at the core of the financial crisis, the bis central bankers ’ speeches eurosystem actually requires a minimum aaa rating at issuance. 2 all in all, the eligibility criteria help to protect the eurosystem, while ensuring that sufficient collateral remains available to our counterparties under any kind of economic scenario, so that monetary policy can be implemented. the third line of defence relates to other elements of the collateral risk control framework. margin call policies and risk control measures such as valuation haircuts are applied to mitigate credit, market and liquidation risks related to the collateral assets that need to be sold to cover the exposure of defaulted counterparties. another key component of the financial protection of the eurosystem when performing credit operations is the valuation of collateral assets. in this regard, the eurosystem is making considerable efforts to maintain state - of - the - art valuation techniques for those assets for which a reliable market price may not be available. i would like to emphasise that our collateral eligibility and risk control framework is continually reviewed, and the lessons learned from the crisis are obviously being incorporated into it. that being said, it is also relevant to point out that our framework is designed to be applied consistently in both good and bad times. our creditworthiness allows us to maintain conservative risk control measures, such as haircuts, above market standards in normal times. counterparties are willing to accept such haircuts because they know we are not