Access to financial services has been a subject of increasing policy debate in developing countries. Financial inclusion is important as it reduces poverty and inequality, allows poor people to smooth out their consumption and invest in their futures through education and health.
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).