Over the years a number of policy measures have been designed and implemented to improve the proportion of financially included Pakistanis and expand the uptake of formal financial services. However, from the demand side perspective data reveals that there is still a lot of ground to cover, especially in case of women. As per the most recent Financial Inclusion Insights (FII) Survey 2020 [1], topline financial inclusion in Pakistan is estimated at 21%, expanding 7 percentage points (ppt) since the last wave was conducted in 2017. While the delta between the two waves is the highest recorded since inception of the FII survey in 2013, financial inclusion is still significantly low when compared to countries with similar socioeconomic profiles, i.e., India (78%) and Bangladesh (47%).

Let’s Talk Numbers

While the headline number for financial inclusion in Pakistan has been improving, disaggregated data shows a worsening situation in terms of the gender gap. As per latest stats 36% (2017: 20%) of Pakistan’s adult male population is now estimated to be financially included; the ratio for adult women is still in the single digits i.e., 7% (2017: 7%). Over the last five-year period the gender gap has widened to a staggering 30%. More worryingly, the 2021 Global Gender Gap Report 2021 by the World Economic Forum (WEF) ranks Pakistan at 153 out of 156 countries, which is 2 places lower than its 2020 ranking. Within the sub-indices, Pakistan has the lowest gender parity (0.33) for “Economic Participation and Opportunity”.[2]

For the uptake and penetration of digital financial services, mobile phone ownership serves as an important measure. The latest FII survey findings show that only 26% of female respondents indicated owning a cell phone; in contrast the proportion was almost 3x more for male respondents. Similarly, in case of SIM card ownership, the gender divide was as high as 47%. The adverse impact of this disparity is corroborated by the finding that the male population reporting having a registered mobile money account in their name saw an upsurge of 10 ppt since 2017 and stood at 17%, while only 2% of female respondents reported having a mobile money account. The survey also gauges financial literacy among respondents, based on knowledge of four key concepts: i) interest rates, ii) interest compounding, iii) inflation, and iv) risk diversification. ~14% of female respondents were counted as financially literate, whereas 25% of men seemed to understand these terms. All these demand side statistics raise serious concerns regarding the readiness of Pakistani women to get connected with the financial ecosystem.

Source: Financial Inclusion Insight Survey, 2020

Female Mobile Money Accounts on the Rise but Under Developed Regions being Ignored

In the enhanced National Financial Inclusion Strategy (NFIS), which was rolled out by the incumbent government as part of its 100- day agenda, the government has set a target of achieving 20 million women operated digital transaction accounts by 2023.[3] As per the most recent statistics published by the State Bank of Pakistan (SBP) there were ~15 million women operated mobile money accounts as of Dec. 2020, registering a YoY growth of 51%. This significant growth can be attributed to higher consumer preference for online transactions due to the ongoing pandemic. However, it is imperative to highlight the disparity among provinces. 67% of these women operated mobile money accounts are in Punjab, the share has actually grown by 3 ppt during 2020. [4] While Sindh and Khyber Pakhtunkhwa (KP)—making up 22% and 10% of the pie, respectively—saw a contraction in their respective shares during the outgoing year. Balochistan, Azad Kashmir and Gilgit Baltistan (GB) combined constitute a meager 3% of these female accounts.[5] While the overall number of women operated accounts is on the rise, outreach is restricted (seemingly) due to an unbalanced approach adopted by the supply side where the underdeveloped regions are lagging behind. Moreover, the national male/female split for mobile money accounts currently stands at 76%/24%. For KP, Balochistan, Azad Kashmir and GB the ratio of female accounts is alarmingly less than the national average.

State Bank’s Banking on Equality Policy – A Much Needed Intervention

To squeeze the widening gender gap in terms of financial inclusion, the State Bank of Pakistan (SBP) released the draft Banking on Equality policy document in December 2020. The document entails short-term, medium-term and long-term policy measures aimed at encouraging uptake of formal financial services by Pakistan’s adult female population. The SBP is currently soliciting stakeholders’ feedback to refine and finalize the said policy. The proposed policy measures are based on 5 pillars to further strengthen the supply side: i) Gender Diversity in Financial Institutions and their Access Points, ii) Women Centric Products and Services, iii) Women Champions at all touch points, iv) Robust Gender Disaggregated Data Collection and Target Setting, and v) Policy Forum on Gender.

The draft policy document acknowledges the lack of gender diversity within banking employees. Women currently represent 13% of overall bank staff (including head offices, branches and branchless banking agents); branchless banking has alarmingly low incidence of women agents at 1%. To increase the number of women employees within the sector, the policy proposes a target of 20% for all banking institutions. The policy also proposes that all branchless banking providers shall design a clear Gender Mainstreaming in Agents Policy (GMAP), with a mandatory requirement to increase share of respective female branchless banking agents to 10% by Dec. 2022.

For the achievement of its second policy goal of having women centric products and services, it is proposed that all banking institutions should have a specialized department for women financial services along with a female marketing team with an aim to expand financial literacy and understanding of banking services among women. The offerings (current and new) should be inspected and refined so that they are better suited to address requirements of female consumers.

The policy also talks about the idea of having specialized women desks for better consumer experience and redressal of consumer complaints. As per the proposed measures, financial institutions will be required to have women consumer representatives at at least 75% of their touch points over the next three years.

With regard to the collection of gender segregated data, it is important to stress the need for ensuring granularity of data. Also, supply and demand side statistics at times quote different figures for the same metric. Identifying and assessing data inequality is very important so that institutions can design programs that are needed to uplift the un/underserved segments and geographies. The policy envisions to implement a system where quarterly gender-disaggregated supply side data related to share of men, women and transgender in bank accounts, credit, payments, agri credit disbursements, Islamic financing, etc. will be acquired from all SBP regulated financial institutions i.e., commercial banks, Development Finance Institutions (DFIs), Electronic Money Institutions (EMIs) and Microfinance Banks (MFBs). The policy also talks about having a specialized policy forum on gender and finance that can advocate the changes/improvements required in the existing regulatory frameworks and initiate a dialogue about the innovations required to support women’s financial inclusions.

The roll out of this policy indicates dedication of the apex regulator to bridge the increasing gender gap within financial connectivity to the formal system. While it aims to address key supply side issues, the policy also sets targets to educate the demand side and conduct targeted marketing campaign to enhance financial knowledge among women. To further reinforce effectiveness of the policy, however, it is also crucial to design supply side penetration targets for under developed regions necessary to curb regional disparity. Enhanced cellular connectivity/ownership among women and promotion of digital financial services is the key, as it opens up the avenue of digitally remitted social welfare payments through which a large number of women can be brought into the financial inclusion net.

While the immediate focus should be to improve access to and outreach of formal financial system, the longer-term vision should focus on refining financial products and infrastructure that can benefit the ultimate consumers. A blog post by the Consultative Group to Assist the Poor (CGAP) titled Beyond Access and Usage: Financial Services for Livelihoods also puts emphasis on this idea and discusses different sector specific approaches that can be used to have a meaningful and positive impact on the livelihoods and income patterns of the financially included population. Therefore, it is imperative for the policy initiatives to set well formulated short- and medium-term targets that can contribute to achieving the long-term goal of financial empowerment and sustainability.

[1] The FII survey is a joint initiative of Kantar and the Bill and Melinda Gates Foundation (BMGF). The first wave of the survey was conducted in 2013 and covered eight countries in Africa and Asia.

[2] Sub-indices include: i) Economic Participation and Opportunity, ii) Educational Attainment, iii) Health and Survival, and iv) Political Empowerment.

[3] Ministry of Finance. National Financial Inclusion Strategy. http://www.finance.gov.pk/NFIS.pdf.

[4] Karandaaz Data Portal. Mobile Money Accounts – Female. https://portal.karandaaz.com.pk/dataset/branchless-banking-accounts-female/1269.

[5] Ibid.