Branchless Mobile Banking Takes off in Pakistan
By Riaz Haq
CA
Spurred by a favorable regulatory and technology environment, Pakistan is witnessing dramatic growth in branchless banking, according to a March 14, 2012 report by the State Bank of Pakistan.
Here are some of the key indicators contained in the State Bank report:
1. Number of branchless banking accounts jumped 40 percent to 929,184 in October-December 2011 (second quarter of FY2011-12) from the preceding three-month period.
2. Total amount of branchless banking deposits surged 169 percent to Rs 503 million in Oct-Dec 2011 from July-September 2011.
3. Number of branchless banking transactions during the second quarter rose 30 percent to 20.6 million while the value of transactions showed a growth of 35 percent to reach Rs. 79,410 million.
4. Branchless banking agents’ network in Pakistan grew by 16 percent in the second quarter (October- December 2011) of current fiscal year 2011-12 to reach 22,512 agents covering the entire length and breadth of the country.
5. The average size of branchless banking transaction was Rs 3,855 while the average number of daily transactions was 228,855.
6. Bills payment and mobile phone SIM card top-ups remained the dominating activity in the quarter under review with 53 percent share in the total number of transactions, followed by fund transfers and deposits with share of 39 percent and 8 percent respectively.
7. While P2P payments remained the most popular mechanism with 74pc share in the total funds transfer, mobile branchless banking is penetrating all areas of payments such as utility bills, Government-to-Person (G2P) and Person-to-Person (P2P) payments while scaling up other services relating to deposits and loans.
A 2011 report by the World Bank's Consultative Group to Assist the Poor (CGAP) describes Pakistan's mobile banking as "a unique laboratory for innovation". Here's an excerpt from it:
"Branchless banking regulation was first introduced in Pakistan in April 2008. From the beginning, the State Bank of Pakistan (SBP) has taken a constructive regulatory approach by providing clear guidance and being willing to listen to businesses and adjust regulation where necessary. A variety of business models is emerging that involves a wide range of players, including mobile network operators (MNOs), technology companies, and even a courier business. (Notably, a bank remains ultimately liable to SBP in all the models.) The government is further encouraging innovation by piloting the use of branchless banking to distribute government payments. Taken together, these factors make Pakistan a unique laboratory for innovation."
In a country where only 22% of the population owns bank accounts and more than 62% owns mobile phones, mobile banking is proving to be the fastest way to promote financial inclusion considered by experts to be essential to lift people out of poverty. Benefits include easy access for rural customers to banking services through agents in villages without bank branches, better documentation of the economy, enlarging of the tax-base and efficiency of economic transactions.
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