15343-MEX

Farrukh
Junani

[BRANCHLESS
BANKING IN
PAKISTAN]

BRANCHLESS BANKING IN PAKISTAN

Introduction:
Since the creation of Pakistan in 1947 banking sector rapid and massive growth. At
this point of time around 14% of the total pollution of this country has conventional
bank account. This is still low as compared to other countries of the region and
worldwide stats.

The State Bank of Pakistan realized the gravity of the situation and once the
technology was available, grasped the opportunity to bring the unbanked lower
income groups and rural population into the fold. The solution to this situation is
branchless banking that relies heavily on internet, especially through
telecommunication networks because of their reach in remote and underprivileged
areas which have no/less infrastructure

Branchless banking Idea and Potential:

Branchless banking is defined as the delivery of financial services outside
conventional bank branches setup, often using agents and relying on information
and communications technologies to transmit transaction details typically cardreading point-of-sale (POS) terminals or mobile phones. It has the potential to
radically reduce the cost of delivery and increase convenience for customers.

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Consequently, branchless banking can increase access to financial services for the
poor or the rural population, but only if regulatory body allows the following
aspects:
(i) Allow the use of a wide range of agents outside bank branches, thereby
increasing the number of service points.
(ii) Easy account opening (both on-site and remotely) while maintaining adequate
security standards.
(iii) Permit a range of players to provide payment services and issue e-money (or
other similar stored-value instruments)
The Consultative Group to Assist the Poor (CGAP) is a global partnership of 34
leading organizations that seek to advance financial inclusion. As CGAPs definition
states, branchless banking is all about the financial inclusion of the unbanked, who
often belong to the lower-income groups. The role of information and
communication technologies is central in this approach.
The basic concept is, for those who cannot or do not go to the bank for logistical or
at times even social reasons, the bank comes to their doorstep or at least nearby.
Major services on offer:
(i) Deposits
(ii) Withdrawals
(iii) Remittance to various cities, where the receiver may not need to have a bank
account
(iv) Payment of utility bills
(v) Payments for products/services provided by vendors who accept e-payments
through branchless banking channels (for example Internet Service Providers)
In addition to consumer-centric services, there is also great potential for the
government. They can use branchless banking to make/ receive payments from
remote areas where physical infrastructure is not present. (For e.g: Income Support
program/ Pension disbursement)

Branchless Banking Model In Pakistan:

In Pakistan two parallel models are working at the same time for branchless
banking.
Bank-led Setup in which bank establishes relationship with a 3 rd party distribution
network and carry out activities.
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Telco-Led setup in which telco establishes relationship with a 3 rd party distribution
network and a bank to carryout activities. All the successful models worldwide are
telco led setups due to better agent management and mass marketing/distribution
capabilities of such firms.
Telco led Mobile Bank working can be understood from the following diagram:

Main Players Of Pakistani Market:

In Pakistan following are the main players of this banking category:

Tameer Microfinance Bank Limited (Easypaisa),

United Bank Limited (Omni),
Waseela Microfinance Bank Limited (Mobicash),
Askari Bank Limited (Timepey),
Habib Bank Limited (HBL Express),
U-Microfinance Bank (U-Paisa),
Bank Alfalah (Mobile Paisa)
MCB Bank (MCB Lite).

This sector is showing a massive growth of more than 20% on quarter to quarter
basis. Currently more than 20 million mobile accounts are operating with
transaction volume over 500 billion rupees with more than 100 million transactions
quarterly.
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To understand the nature of transactions we can say that OTC and m-wallet
transactions are customer oriented transactions and can be further segregated as
per follows:

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In Pakistan mostly users of Branchless banking are basic users the account type
distribution is given as per follows:
FIGURE5: Distribution of BB Accounts

Average deposits in branchless banking vary to a large extent as per the account
type. The distribution is given below:

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The success of branchless banking lies in the penetration ability of the service
provider into the market through its agents. Following table shows the number of
agents for each market player with account opening facility.

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We can take a glance at the branchless banking in the following figures:

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Macro-Economic indicators and branch less banking opportunities in
Pakistan:
Only 5% of the households use mobile money, hence the market is growing at
40% every year.
98% of the OTC users are satisfied with the banking services and they want
recommend services to others. This is unlike conventional banking and the
main reason behind the rapid growth.
40% Pakistani households save money in unconventional manner hence big
opportunity for saving accounts.
More than 100 million GSM services subscriber in the country. This can lead to
increased customer base in BB
40 million people in Pakistan are living below the poverty line. This Bb
medium can be used for G2P payments on large scale.
Only 11500 conventional bank branches in Pakistan with 2500 serving in the
rural areas (60% population of Pakistan lives in rural areas)

Overall Benefits of Branchless Banking:

Elimination of inefficient and corrupt practices

Streamlined and better customer serving
People Trust the branchless banking system
BB has largest agent network in the country with reach to the most remote

areas as well
Electronic & Documented disbursements
Proper maintenance of records and transparency of all transactions
Safe, secure and most convenient mode of payment
Helping beneficiaries in saving travelling costs and time
24/7customer support service
Dedicated relationship team for complaints management and reconciliation

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Future of Branchless Banking in Pakistan:
Impact on GDP could range between +3% , primarily through increased

entrepreneurship
MFS also leads to increased:
Access to healthcare and insurance
opportunities for women for access & control of funds
Transparency through fewer cash transactions
Mobile financial services could potentially reach 71% of the unbanked

population
Further contribute to the creation of 1 M additional jobs
Increase financial security & reduce cost of transactions for rural poor

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CITATIONS

www.sbp.org.pk/publications/acd/branchless.htm
Socio-Economic Impact of Mobile Financial Services (BCG Report

April 2011)
Financial inclusion and tracker survey April 2013, Bill and Melinda

gate.
CIA World Factbook, PSIS dataset, 'Getting Finance in South Asia'

World Bank
Business recorder banking reviews

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