How Pakistan’s central bank is aggressively promoting digital finance

  • Pakistan remains a heavily cash-based economy and has poor levels of financial inclusion relative to EM peers
  • The State Bank of Pakistan has been actively promoting the digital transformation of the financial services sector
  • In this report, we highlight six of the central bank's initiatives, from digital banking licences to fee waivers
How Pakistan’s central bank is aggressively promoting digital finance

Pakistan’s financial inclusion levels are poor relative to emerging market peers, with more than 100mn unbanked adults and most of its c3.3mn SMEs (which contribute one-third to GDP) excluded from accessing formal credit lines. It also remains a heavily cash-based economy with the currency in circulation equivalent to c15% of GDP, one of the highest ratios in emerging markets.

Financial penetration in emerging markets

Towards this, the State Bank of Pakistan (SBP), under the leadership of Governor Reza Baqir, has been actively promoting the digital transformation of the financial services sector and focusing on financial inclusion.

Over the past year the SBP has introduced several initiatives. In this report we highlight six of them.

1. Introduction of the Electronic Money Institution licence

Previously, digital payments platforms in Pakistan had to acquire a banking licence, which was both difficult and costly to obtain. The new EMI licence is less restrictive, easing some barriers to entry.

2. Raast – an instant payment system

Raast is a secure, efficient, and low-cost digital infrastructure backbone onto which private companies can attach their front-end platforms. It should significantly reduce transaction costs and improve the user experience by allowing multiple payments providers to interconnect. It should also promote innovation by providing a level playing field for all financial services providers. Raast was launched earlier this year, and will be fully rolled out in 3 phases by 2022.

3. Framework for digital-only banks

The SBP has introduced a draft regulatory framework for digital-only banks, with lower capital and compliance requirements. This should help to attract local entrepreneurs and international sponsors to launch fully digital competitors to the established banks.

4. Launch of Roshan Digital Accounts (RDA)

These are digital accounts for overseas Pakistanis, which can be opened remotely with minimal KYC requirements compared to a standard bank account. Various facilities can be accessed through RDAs such as listed equity investment, lucrative rates on government investment instruments (Naya Pakistan Certificates) and subsidised car loans.

5. Fee waivers on online banking transaction

Since the start of the Covid pandemic, the SBP has waived online banking transaction fees, which has resulted in a significant boost to online transactions. In 2020, internet and mobile banking transaction value rose by 105% yoy.

6. Minimum requirement of services via internet banking

The SBP has made it mandatory for banks to provide a minimum set of services through their web and mobile banking platforms. This includes bill payments, funds transfer, beneficiary management, limit management, credit and debit card management, stop cheque payment etc.

Acknowledgements: We would like to thank Rabail Adwani for his assistance with this report.

Related reading:

The ultimate guide to Pakistan fintech

Five Pakistan fintechs to watch

Why Pakistan's low financial inclusion is a huge opportunity for fintechs

How technology can boost financial inclusion and which markets will benefit

Raast: Revolutionising Pakistan’s digital payments ecosystem


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This report is independent investment research as contemplated by COBS 12.2 of the FCA Handbook and is a research recommendation under COBS 12.4 of the FCA Handbook. Where it is not technically a res...

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