Conventional banking has typically focused on the 5Cs of “Credit” – character (identity), collateral (security), capacity (to repay), capital (savings, investments, or other assets), and conditions (usage of loan) – while making lending decisions.
Several governments in developing world, along with the donor community, seem keen on developing an “enabling environment” for digital financial services (DFS). DFS is seen as a pathway towards financial inclusion, which is being promoted as part of global development agenda.
Pakistani individuals, firms and government are not generating enough savings to meet the economy’s investment requirements. This lack of domestic savings results in an inherent dependence on “foreign inflows” in the form of remittances, issuance of sovereign bonds/loans and flows under Foreign Direct Investment (FDI).
In the context of developing countries like Pakistan, financial inclusion is generally considered to be more about broadening the access of formal financial services (payments, savings, loans, insurance products etc.) to individuals and Small & Medium Enterprises (SMEs) that are currently out of the banking system.