financial inclusion — the unfair disadvantage
The term ‘Financial inclusion’ can sound extremely complex when hearing it the first time but it is actually quite simple if understood correctly. In order to attain details about this topic, Mr. Rehan Akhtar, the Chief digital officer at Karandaaz Pakistan agreed to provide us with some insights about the inner workings and dynamics of financial inclusion in Pakistan. More so, how many people in Pakistan have access to formal institutions. As a Veteran of the corporate sector with two decades of experience with working with some of the best companies across the board, from chevron to Telenor and now being with Karandaaz, Rehan is focusing on bringing the unbanked population of Pakistan into the system. With a vision to bring about new opportunities and possibilities and spawn an entire ecosystem to propel the economy for future generations.
One of the first things we learnt is in Pakistan ‘cash is king’. We are predominantly a cash loving society that has habitually thrived on flowing cash.
However, societies that are dependent on cash have major issues that can hinder a country’s economic development. As a result, a country’s system loses out on documentation and accountability which is something that should essentially be on the record. A digitized system of finances is in fact a catalyst in achieving semblance of order.
Under a world bank survey carried out in 2017, 79% percent of Pakistan’s population is financially excluded. This is fairly large compared to many other countries on the financial exclusion radar. While It is easier to have merchants across the urban epicenters, a major chunk of the population is excluded due to being based in remote areas with very little access to developed technology. Another reason is that most of the financial merchants such as visa and Mastercard are not based in the rural areas. What is most interesting about this exclusion is 57% of the population from the rural areas are women.
Although digital finance seems to be making its mark, currently it’s not enough. According to a financial inclusion insight survey only 21% of Pakistan’s population in 2019 stated that they had access to a bank account in formal institutions which is extremely low compared to so many developing countries.
The most complex information that was drawn from a financial inclusion injunction in collaboration with the Bill and Melinda gates foundation was that it is impossible to cover the entire market by simply using one product and assume that everyone needs the same product as well. This has resulted in a major chunk of several socio-economic classes being underserved due to accessibility deprivation. The real challenge arises on how to build a sustainable financial product that is also accessible to someone at the bottom of the socio-economic pyramid.
Naturally with growing levels of population in developing countries there are also growing levels of poverty. A large chunk of the poverty-stricken population is often supported through cash and other odd financial solutions which greatly affect financial exclusion. Although a universal payment mechanism is the solution, it is more so the kinds of products and services that need to be innovated, created and developed to drive financial inclusion in the country. Most importantly, what will be Pakistan’s tipping point? E - commerce, government payments or banking services?
It is here that Kaarandaz has attempted to figure out its role in real problem solving — the onboarding for every member of any market segment/ socio economic class should be possible. Everyone should be able to receive financial access without any hassle in order to meet their core needs. An organized digital financial ecosystem with a consistent supply side is the main focus area of Karaandaz. One of the biggest problem areas is offering a product to a non-user who is not aware of the complexities behind the importance of a system.
In conclusion it is safe to say that Pakistan is a nation in dire need of digitized payments in order to rule out corruption, bring about transparency and increase the economy’s overall accountability patterns. But more so, there is a dire need of problem solving and developing reliable infrastructure in all the areas that have habitually been neglected over decades of economic dysfunctionality.
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