Policy & Regulatory Bottlenecks for Digital Financial Services in Pakistan

Financial inclusion is widely considered as a powerful tool towards achieving Sustainable Development Goals (SDGs), especially reducing poverty (SDG1), promoting gender equality (SDG5) and enabling inclusive economic growth (SDG8). In Pakistan, more than 100 million adults lack access to formal financial services corresponding to 5.2% of the unbanked population of the world. Pakistan’s National Financial Inclusion Strategy (NFIS), adopted in 2016, sets the target to extend access to formal bank accounts from 16% of the adult population in 2014 to 50% by 2020. Recently, government has revised NFIS targets and has pledged to achieve 65 million active Digital Transaction Accounts DTAs including 20 million female accounts by 2023. Rapid and sustained expansion of (DTAs) is one of four drivers of NFIS and is considered as a modus operandi for accelerating financial inclusion in Pakistan.

With more than 161 million biometrically verified mobile phone subscribers (77% teledensity) and 67 million mobile broadband (3G/4G) users, Pakistan stands at the cusp of an unprecedented opportunity to offer a broad range of innovative Digital Financial Services (DFS) to the poor. Recent gains in financial inclusion numbers in Pakistan were mostly due to BB accounts -10 million BB accounts were opened during the period July–December 2017. On December, 2017, there were 50,565,334 Bank Accounts, including 37.3 million Branchless Banking Accounts. However, growing inactive BB accounts and gender gap in account ownership remain a matter of concern for the government as well as market players. During last quarter, active accounts numbers have decreased drastically. As of December 2018, out of 47.2 million total BB accounts (9.6 million female and 37.5 million male accounts) only 19.8 million accounts were active.

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