Policy Brief – Identifying Regulatory Bottlenecks for Digital Financial Services in Pakistan

Thematic Area: Knowledge Management
Project Title: Policy Brief – Identifying Regulatory Bottlenecks for Digital Financial Services in Pakistan
Expected Start Date: May 2017
End Date: June 2017
Task Manager: Director KMC, Karandaaz Pakistan

About Karandaaz Pakistan

KARANDAAZ PAKISTAN, a not-for-profit company established in August 2014, promotes access to finance for small businesses through a commercially directed investment platform, and financial inclusion for individuals by employing technology enabled digital solutions. The company has financial and institutional support from leading international development finance institutions; principally the United Kingdom Department for International Development (DFID) and the Bill & Melinda Gates Foundation.

Karandaaz Pakistan has three core work streams:

  • Karandaaz Capital focuses on providing credit and capital to high impact small and medium-size businesses, and business models that have potential to generate sustainable employment and offer attractive risk-adjusted financial returns.
  • Karandaaz Digital focuses on expanding the poor’s access to digital financial services in Pakistan by working across the ecosystem of local actors – policy-makers, regulators, government departments, businesses, researchers and academics. The DFS team facilitates digitization of government and other payment streams, encourages experimentation with businesses, and provides support to innovative DFS start-ups.
  • Knowledge Management and Communications (KMC) focuses on developing and disseminating credible insights to inform the core themes of the Company, including DFS innovation, women’s empowerment and youth employment.


The State Bank of Pakistan (SBP) and the Pakistan Telecommunication Authority (PTA) are the two main regulators of branchless banking in the country. Both organisations, primarily the SBP, have developed mobile banking / branchless banking regulations and rules in the following order:


  1. Branchless Banking Regulations 2008 – SBP
  2. Branchless Banking Regulations 2011 –SBP (amended)
  3. Branchless Banking Regulations 2016 –SBP (amended)
  4. Regulations for Technical Implementation of Mobile Banking 2016 – SBP and PTA


  1. Payment Service Providers (PSP) 2014 – SBP
  2. Payment Service Operators (PSO) 2014 – SBP

Identification of Need Analysis

The National Financial Inclusion Strategy (NFIS)[1] aims to expand financial access to at least 50 percent of Pakistan’s population by 2020. The NFIS prioritizes the potential role of digital financial services (DFS) in achieving this target. The SBP has played a vital role in fostering and enabling growth and expansion of DFS. As the sector has grown and more players have entered this space, the SBP has consistently introduced and amended policies and regulations ensuring healthy growth and competition, with a keen focus on improving access to finance across multiple income and business segments.

Since the introduction of branchless banking regulations in 2008, Pakistan has seen exponential growth in digital service accounts and transactions. Mobile wallet accounts grew by 16 percent in quarter 3 of 2016 (July to September), to an estimated 16.9 million. In a country with more than 100 million unbanked individuals, DFS offer a promising solution. Rapid growth in the industry however, is accompanied by the need for a constantly evolving regulatory and policy environment. As technology-enabled solution have mushroomed in a variety of sectors around the world, from the financial industry to transport and travel, regulators across the board have struggled to keep pace.[2]

To facilitate with this process and in keeping with the objective of the NFIS to improve financial access via DFS, Karandaaz Pakistan intends to develop a series of policy briefs focused on regulatory and policy gaps, bottlenecks and challenges.

Scope of Work

As a first in a series of policy briefs, the primary aim of this assignment is to identify regulatory bottlenecks faced by digital service providers (DSPs) in Pakistan. To ensure that the regulatory landscape is adequately assessed, it is recommended that regulations in the following categories are assessed and gaps and/or bottlenecks identified:

  1. Sector stability and integrity
  2. Products and services
  3. Consumer protection and literacy
  4. Regulation and supervision
  5. Financial architecture (e.g., Fintechs, agents, merchants)
  6. Sustainability and profitability (e.g., tax laws, subsidies)
  7. Financial inclusion

The Consultant may recommend alternative categorizations, which will be shared with Karandaaz Pakistan. Gaps and bottlenecks within each category will be identified based on expert consultations and international experience and then prioritized. The gaps and/or bottlenecks may be prioritized based on selected criteria e.g., impact (number and type of DSP’s impacted, growth), need (is it skewing the sector and competition), timeliness (quick wins), etc. Recommendations for the gaps and bottlenecks will also be given.

The assignment will be divided into three distinct phases, regulatory and secondary literature review, stakeholder consultations and analysis and documentation:

  1. Regulatory and secondary literature review:

The contractor is to undertake a regulatory review supplemented with a secondary literature review. In addition to local regulations and literature, the consultant should also review regulations and literature pertaining to at least three countries leading in the DFS space e.g., Kenya, Indonesia, Argentina, Brazil, etc.

  1. In depth Interviews with leading DSP’s and Regulators:

Consultations with heads of DFS departments of major players in the industry are to be undertaken (banks and telcos). Consultations will also be held with regulators and policy makers, donors, associations. The purpose of the consultations will be twofold:

  • To finalize the list of regulatory challenges/bottlenecks faced by the sector (and add any that have been overlooked)
  • To prioritize the bottlenecks and discuss recommended solutions
  1. Analysis and Reporting, Presentation and Extraction of Policy Brief

A two-fold process is suggested for developing the policy brief:

  • The contractor will document and analyse all information and develop a detailed background paper (20-25 pages).  The detailed background paper will clearly list all bottlenecks identified in each category, based on and supported by findings of the literature review (inclusive of international experience) and stakeholder consultations. Once the detailed background information has been collected and collated, it will be assessed to prioritise gaps and bottlenecks, based on selected criteria e.g., impact (number and type of DSP’s impacted, growth), need (is it skewing the sector and competition), timeliness (quick wins), etc.
  • Key findings from the background paper will be extracted in a policy brief (no more than 4-6 pages), together with recommendations.

Both documents will be submitted to Karandaaz. The finalisation of the documents will be subject to approval by the KM and Digital Team at Karandaaz.


The engagement shall commence in May 2017 and expected to be concluded by June 2017 (8 weeks). The Contractor shall provide a detailed background paper (20-25 pages) from which the final policy brief, no longer than 4-6 pages, will be extracted. The policy brief should be clearly and concisely written, identifying:

  • Top 2-3 gaps and/or bottlenecks per category
  • Recommendations, based on comparisons with countries possessing enabling regulatory provisions for the identified bottlenecks

During the assignment the consultant will also share a stakeholder consultation plan with Karandaaz for approval prior to starting industry consultations. The Karandaaz Pakistan team shall participate in primary research activities where possible. The Contractor shall be responsible for making all logistical arrangements required with respect to the engagement.

The consultant will remain available to respond to any queries thereafter, including one presentation at a Karandaaz event (date TBC at a later stage). A blog will also be authored and submitted in partnership with Karandaaz for upload to the company website.

The tentative timeline for this study is May 2017 to June 2017 unless the appointment is extended or a new appointment is made.  While the timeline can be adjusted, the unit cost of the project may stay the same. The tentative payout schedule will be as below:



% Payment

1. Updated Work Plan

2. Stakeholder Consultation Plan

3. Detailed Background Paper


4. Final Policy Brief

5.  Blog


Consultant Requirements

The ideal consultant will bring the following key elements:

  • In-depth knowledge of Pakistan’s DFS/branchless banking sector and relevant regulatory and policy landscape; international knowledge and experience of DFS regulation highly recommended
  • Strong interpersonal skills with prior experience of conducting stakeholder consultations at senior levels
  • Prior experience of working in branchless banking in/with Bank/MNO will be preferable
  • Track record in conducting similar assignments with very strong analytical skills to sift through varying viewpoints and compare divergent regulatory approaches contextualized to Pakistan’s financial inclusion and branchless banking objectives
  • Strong network in Pakistan’s telecom/financial sector including institutions, regulator, etc.
  • Very strong writing skills

Applicants will need to meet the following pre-requisite criteria:

  • Has an NTN
  • Is able to travel to and work across Pakistan

Proposal/Documents Submission Protocol

All applicants should submit an updated CV, proposed work plan (indicating research steps, assignment duration, and schedule for submission of deliverables) and budget in PKR. The application should also include:

  1. Indicative list of relevant literature to be reviewed as part of action item 1 in the Scope of Work (Regulatory and secondary literature review)
  2. Indicative list of stakeholders to be consulted as part of action item 2 in the Scope of Work (In depth Interviews with leading DSP’s and Regulators)

Document specifications: Font Calibri, Font Size 11.

Soft and hard copy of application documents must be mailed to the following email addresses no later than May 26, 2017:

Email: procurement@karandaaz.com.pk

Postal Address: Procurement, Karandaaz Pakistan, Mezzanine Floor, Ali Plaza, Nazimuddin Road (D Chowk), Islamabad

Envelops should be marked:  Policy Brief – Identifying Regulatory Bottlenecks for Digital Financial Services in Pakistan”.

All queries should be directed to procurement@karandaaz.com.pk no later than May 23, 2017.

Late submissions will not be entertained.

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