The Special Advocate, along with her partners, conducted a country visit to Pakistan in November 2019 to support the country’s ongoing work to increase financial inclusion. The UNSGSA previously visited the country in 2016, shortly after Pakistan launched its first national financial inclusion strategy (NFIS).
Pakistan’s NFIS aimed to scale up access to formal financial services in a country where only 13% of the population was financially included, according to the 2014 Global Findex. It helped enable a modest increase to 21% (Findex 2017). However, women continue to trail men in terms of access, creating an 18% gender gap—35% of men own an account, compared to only 7% of women.
Tech-Enabled Solutions: An Opportunity to Boost Financial Inclusion for Pakistanis
Technology will play a vital role in Pakistan’s efforts to increase financial inclusion, especially to close the gender gap and reach underserved segments. To further support these efforts and offer input, the Special Advocate met with leaders from the public, private and development sectors. This included Prime Minister Imran Khan, State Bank of Pakistan (SBP) Governor Reza Baqir and Advisor to the Prime Minister on Finance Abdul Hafeez Shaikh.
The UNSGSA also spoke at the launch of the Ehsaas Financial Inclusion Strategy, part of the country’s broader Ehsaas poverty alleviation program. Further, she delivered a speech at a ceremony to establish a micropayments gateway.
To follow up on her visit to Pakistan, the UNSGSA held a videoconference call in March 2020 with key stakeholders in Pakistan to further support and offer advice on the country’s key priorities for financial inclusion.It included Governor Baqir, the Special Assistant to the Prime Minister on Poverty Alleviation and Social Protection Dr. Sania Nishtar and the Advisor to the Prime Minister on Digital Pakistan Ms.Tania Aidrus. Representatives from the UNSGSA’s partners also participated. A second videoconference is scheduled to be held later in 2020 as well.
UNSGSA Queen Máxima’s Five Key Priorities for Pakistan
1. Promote digitization of financial services and government payments.
Pakistan’s pro-poor micropayments gateway can help customers more easily make small transactions for a low price without interacting with multiple providers. In the long term, it could increase competition between providers, lower costs, enable infrastructure sharing, as well as increase value for customers.
The UNSGSA recommended that the Prime Minister’s Economic Team of Advisors set targets to digitize government payments and receipts. This could potentially bring millions of people into the formal financial system. Since the Special Advocate’s visit, it was agreed that government bulk payments would be the first use case for the new micropayments gateway. Additionally, the delivery of the micropayments gateway has become a national priority for Prime Minister Khan and Governor Baqir.
2. Expand the focus on women’s financial inclusion.
SBP has announced a renewed focus on women’s financial inclusion and drafted a policy to reduce the gender gap, which has been shared with development partners. Pakistan aims to introduce the new policy in 2020 with input from the Special Advocate and her partners.
The UNSGSA congratulated the SBP for collecting gender disaggregated data on branchless bank account activation. This can help policymakers and providers understand women’s usage of such products. Also, she advised SBP to collect and publish additional gender-disaggregated data to provide a broader picture of women’s financial inclusion, which the Central Bank will undertake.
Queen Máxima also met with public sector leaders, including Prime Minister Khan and Dr. Nishtar, to listen to updates on the role of women’s inclusion in the Ehsaas Financial Inclusion Strategy. This included a “one woman, one bank account” approach designed to increase account ownership for rural women. Since then, under Ehsaas, the Benazir Income Support Program (BISP), the largest government program to assist the rural poor, has started to work to digitize payments for its eight million beneficiaries—a group that includes seven million women—which have already been rolled out to approximately half of the participants.
3. Promote ID as a public good.
One of the most important public goods to facilitate financial inclusion is a digital identity system. The UNSGSA encouraged the Chair of the National Database and Registration Authority (NADRA) to make the database function as a public good. Specifically, this allows service providers easier, affordable and safe access to digital customer data to facilitate account opening. In December 2019, NADRA agreed to lower fees for Electronic Money Institutions (EMIs) to match ones charged to banks for customer due-diligence checks.
She also urged SBP and Digital Pakistan to help reform the ID system. The development of critical public goods infrastructure is a key goal of Digital Pakistan. Further, SBP is now exploring how to best lower ID costs as a service for FSPs.
4. Support the establishment of regulatory innovation offices as well as an industry-led innovation association.
The UNSGSA encouraged regulators to establish an innovation office to serve as a one-stop shop for different agencies connected with regulating financial services. The office could enable regulators to learn about new technologies, opportunities and risks. Further, it could:
- Promote coordination among different departments;
- Provide decisions on regulatory approvals and licensing for new products;
- Answer queries from innovators; and
- Set pricing and eligibility criteria.
The UNSGSA offered to connect Pakistani officials with regulators in other countries who have established innovation offices. The Special Advocate also led a roundtable on fintech for regulators and fintech leaders. As a result, fintech innovators committed to establish an industry association to help prioritize common industry challenges. Since the Special Advocate’s visit, SBP set up a subcommittee to form an innovation office, to be hosted at the Central Bank inside the Governor’s office.
5. Support the launch of Digital Pakistan.
The Special Advocate supported the launch of Digital Pakistan and the appointment of an Advisor to the Prime Minister on Digital Pakistan to oversee efforts to increase digital financial inclusion and public goods infrastructure. Following the country visit, the UNSGSA has facilitated introductions for the Special Advisor with development partners to explore partnerships and funding for Digital Pakistan’s identified initiatives.
Digital Pakistan Identified Initiatives
- High-speed internet access for at least 90% of the population;
- Digital infrastructure to pave the way for a digital economy;
- Accessible, efficient and transparent government with key services digitized;
- Digital literacy and training; and
- Innovation and entrepreneurship, including an enabling environment for the growth of a tech ecosystem.
UNSGSA Pakistan Country Visit Partners
Bill & Melinda Gates Foundation, Better than Cash Alliance (BTCA), Consultative Group to Assist the Poor (CGAP), World Bank Group