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Financial literacy – need of the hour!

In Pakistan, the common definition of a literate person is one who could write his/her name in English. According to this definition, literacy rate of Pakistan is 58% (down from 60%) which is very low as compared to regional peers. In 2015, when the UN laid down Sustainable Development Goals (SDGs), quality education was set as Goal No.4 out of 17 goals. The definition of literacy was also modified to cover financial literacy i.e. a person is deemed to be literate if he/she could undertake basic banking transactions.By virtue of this, the literacy rate of Pakistan will be even lower given the fact that there are only 48 million bank accounts.

By spending less on education, we are losing on two counts. On one hand, our semi-skilled labor force could not fetch the much-needed foreign exchange for the country, while on the other hand, those wishing to pursue their dreams over here are constrained by illiteracy. It is important that the federal government increases education budget to 4% of GDP only then provinces will be able to increase their allocations, as promise of increasing education budget to 4% of GDP was made by the government. While the government has tried to balance developmental and education expenses yet the promise of making education an important component of government priorities should have been kept in mind when allocating finances during the budgetary allocations for 2018-19, which could still be done by the incumbent government if they bring in revisions and amendments in the finance bill.

Financial literacy could help improve financial inclusion in the country. It may also address the issue of low access to finance especially for SMEs and women as financial illiteracy is one of the reasons, which put finance out of their reach. With the number of mobile users increasing day by day (150 million users so far), banks could introduce customer service models like multi-lingual MFS application interface, symbolic imageries, voice based interaction for low literacy segments and simplified service offerings. Literacy programs (financial and basic) could also be conducted by or on behalf of financial services providers for clients and potential clients to improve access to financial services and the utilization of finance. Engaging industry champions and intellectuals could also enhance financial literacy, which would create a virtuous cycle thereby addressing the issue of low savings rate and asset creation.


SMEs and microfinance are two areas where financial literacy could bring surprising results. In view of expulsion of expats from Gulf countries, it is pertinent to promote entrepreneurship through SMEs for which the corporate sector and academia must play their role by setting up funds for SME financing.

Following criteria could be set up for entities seeking literacy program grants:

  • Clear and compatible vision for increasing access to financial services to poor and marginalized groups
  • Resolve to create awareness about/demand for financial services and raise literacy levels
  • Legally recognized entity
  • Experience in family literacy programs that target both parents (adults) and children (optional)
  • Appropriate levels of portfolio quality
  • Appropriate levels of transparency
  • Adequate human resource
  • Outreach to present/potential microfinance clients specially women
  • Rural outreach
  • Estimated number of beneficiaries shall be at least 100 individuals

Launch of mobile wallets is another effort to provide impetus to financial literacy. A level zero mobile wallet is a bank account, which allows a customer Rs.50,000 transaction value and is accessed through a phone. While the commercial banking industry has managed to open 48 million bank accounts, the microfinance industry, in the past four years, has been able to open more than 10 million mobile wallets with over Rs.100 billion in savings. The industry has also been successful in managing the gender gap (55% female borrowers) and urban-rural divide (51% rural).

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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