Banking on mobility

Since the turn of the century, Pakistan has seen rapid expansion in the middle income classes that has accompanied urbanisation.

Banks have had an important part to play in this progression. The ability of new workers to become integrated into the capitalist system, to buy homes, cars and dream of better futures has always gone hand in hand with the opening up of credit markets. Pakistan had one of the lowest national loan to value (LTV) ratios around with the concept of mortgages fairly alien only a few years ago.

Responsive banking

Banks then began to step up and offer consumer financing — a positive change born of an increasingly competitive industry landscape. With vehicle leasing, cars and motorbikes within reach of the working classes, a previously near-nonexistent income group began to rise.

A recently modernised banking industry has done well to aid in the country’s socioeconomic development, and can continue to help in the same way if it maintains an offering of innovative and accessible products.

It has been said that asking a bank to be innovative is like asking an airline pilot to do the same. It can lead to financial catastrophe as demonstrated five years ago on Wall Street. This saying, however, only pertains to complex investments that don’t meet an inherent need. Progressive ideas in the commercial and consumer space are a different story. A good example can be found in the Easypaisa programme.

Launched as a partnership between Telenor, a telecommunications firm, and Tameer Microfinance Bank, Easypaisa is essentially a branchless banking platform that enables money transfers and payments through mobile phones, as well as designated kiosks. The entire experience is far more seamless than the kind provided by traditional banks. Mobile banking has enabled access to financial services for the vast majority of Pakistanis in rural areas where they are out of reach of the regular banking system. Even those without mobile phones or accounts with Tameer can use the service.

On the move

As of the beginning of the year, 72 per cent of the population carry mobile phones while only 12 per cent have bank accounts, as was revealed by a representative of Waseela Bank in a report by The News in Pakistan. The potential, therefore, to bridge the gap between services and the rural demographic is immense. It is also especially important since the agricultural sector accounts for the majority of Pakistan’s workforce.

According to the State Bank of Pakistan there were 1.8 million mobile banking accounts at the end of September last year. They revealed that the level of activity in these accounts had also increased significantly. In the three months leading up to the figure, more than 30 million transactions worth around $1.4 billion (about Dh5.14 billion) were carried out. United Bank Limited also launched a similar product called UBL Omni three years ago. The product was used in conjunction with aid agencies and the government to deliver relief funds to those affected by the floods that ravaged Pakistan’s countryside in 2010. It has proven to be an effective method of facilitating aid.

Another type of product, the prepaid card is also aimed at parts of the population who may not have the credentials or income for a conventional bank account. UBL also launched its own Wiz Card recently, which has enabled lower income groups with basic deposit and transaction capabilities.

The State Bank has made it a point to promote the dissemination of basic financial services to the masses. According to them, there are currently ten fully licensed microfinance banks, and the number is growing with applicants in the pipeline. The institution has tried to relax regulations such as capital requirements in order to encourage the practice.

There are still areas left for banks to explore, and these can tackle some pressing issues in Pakistan. A retail leasing product for solar equipment, for example, might help mitigate the crippling problem of power shortages. Judging from the bold steps banks have taken in the last decade, people may look to new products in the future to help push the country forward.