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Balochistan’s financial inclusion needs more transparent measures

Financial inclusion means access to formal financial services including savings, credit, insurance and payments vis-à-vis formal financial intermediaries, at an affordable cost. Today, Pakistan’s financial sector has transformed into a modern and sound financial sector dominated by private banks. The country’s banking sector accounts for 75 percent of financial sector assets. The microfinance sector is significant in terms of financial access. Islamic finance is growing rapidly, and currently accounts for 11 percent of sector assets.

The present government has launched the Pakistan Financial Inclusion and Infrastructure Project aimed at increasing access to financial services for households and businesses by improving usage of digital payments in the country. The World Bank has committed to provide $130 million finance for the project. The project will be implemented by the recently-established Pakistan Microfinance Investment Company, the Central Directorate of National Savings and the State Bank’s development finance group. In 2015, the government launched the National Financial Inclusion Strategy (NFIS) with a vision to allow individuals and firms access to a range of quality payments, savings, credit and insurance services.

There are the clear directives of State Bank of Pakistan (SBP) to the banks to prepare at least a three-year plan to strengthen their presence in Balochistan by taking concrete steps to increase financing under the concessional schemes and to promote businesses in the province. The central bank has directed that all banks are needed to take measures to increase the number of branchless banking agents, branchless banking accounts and ATMs in the province and open branches in underserved districts of the province. There is no doubt that the province offers tremendous opportunities for growth of financial sector as the security situation in Balochistan continues to improve and the projects under the China-Pakistan Economic Corridor (CPEC), development of Gwadar Port and untapped natural resources have brought the province in the radar screen of international investors.

However, the banking sector in Balochistan needs to take effective measures for improving and strengthening its competitive position vis-à-vis other provinces. Basically, a tribal society, the province lacks an urbanized middle class. Truly speaking, the relative wealth increases among the population when a burgeoning middle-class brings greater demand for banking facilities and investors and business also look for more supportive financial services, with a demand for financing solutions, hedge funds, and asset-based securities.

The banks play important role in the economic development of a backward region. The commercial banks perform significant functions like channelizing resources to different sectors of economy, mobilizing the savings, promoting investment, accelerating industrialization and helping the government by providing it source of earning. Unfortunately, the commercial banks in the most backward and least developed province of Balochistan merely played the role of collection booths and hence could not promote industrialization by advancing loans to entrepreneurs. The province faces the shortage of entrepreneurs. If there are some, they are unwilling to take risk. If the banks make the funds available, the dynamic entrepreneurs can come forward. The banks should provide loans to the potential investors, provide them the necessary knowledge and help them establishing and launching industrial or commercial units, and thus creating job opportunities and developing human resources in Balochistan.

Industry, agriculture, business, communication and services have been the most neglected sectors in the province. In capacity of good and progressive financial institutions, the banks could not play their due role for the economic development of the province. In the past, the loans were not given to those who wanted to set up industrial units or launch some projects providing jobs and boosting economic activities in the province. On the other hand, shopkeepers and smugglers largely benefited from the bank loans. Most of the private banks were in control of commission mafia and getting kickbacks. The law and order situation and tribal culture has also been hampering the private commercial banks to play their role of key agents along with the entrepreneurs.

Balochistan needs to place ICT on its priority list to keep pace with the advancement in technology and minimize digital divide. The provincial government needs to take measures for creating a conducive environment for technological innovation and its effective use in financial sector. The banks offering mobile banking services in Quetta need to develop aggressive marketing plans and campaigns to attract customers to visit the agent location for their banking transactions. The banking industry must be able to meet increasingly complex banking needs if it is to flourish in Balochistan. The province cannot catch up with other developed regions of the country in terms of economic development without making investment in new banking technology.

Customer awareness should be increased to encourage use of services such as ATM, credit cards and internet banking in Balochistan. ATM is the predominant alternate delivery channel of e-banking that leads the retail level e-banking/online services in terms of volume.

The banking sector still requires expansion and upgradation of the ATMs to overcome customer complaints across the province. The banks must ensure provision of uninterrupted ATM services to customers and take responsibility for resolution of all types of issues emerging from outsourcing of ATM replenishment.

Policy-makers must work on a strategy to increase the relative wealth among the local population and create a middle-class that will increase demand for banking facilities in the province. The local investors and businessmen should be provided more supportive financial services, meeting their demand for financing solutions.

Presently, the private banks are mostly concentrated in Quetta. Private banks are practicing customer-focused banking and providing modern banking facilities to their customers. In the provincial capital, the ATMs, telebanking, internet banking, credit cards and debit cards have emerged as effective delivery channels for traditional banking products. A credit card is offering valuable benefits to both consumers and banking industry in the province. It is a flexible payment tool accepted at millions of locations worldwide. Credit cards provide access to unsecured credit. They provide all-time access in a day. Moreover, credit cards offer air travel points, car insurance, damage and loss insurance and extended warranty programs. The retailers that accept credit cards receive fast and guaranteed payment, which can reduce line-ups at checkout. Now more bank branches will be opened in Gwadar, the emerging commercial capital of Balochistan.

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