Apr 20 - 26, 2009

Seventy one percent of Pakistanis think that they can easily live their lives without having bank account. This is a finding of Access to Finance Study survey conducted by Nielsen Pakistan and a timely research report since there are small numbers of financial market researches available in Pakistan. Unveiling the many such discoveries of perception of people of Pakistan about financial services, the results of study may give a good starter to financial institutions in making practical policies and tailoring financial products in accordance with socio-economic realities in the country. Department for International Development Pakistan, the World Bank, and Swiss Agency for Development and Cooperation have funded the questionnaire-based survey to know consumers' financial management practices, public perception about financial service providers, usage of financial services, and hurdles in access to financial services. The answers were collected from 10,000 adult respondents predominantly in Punjab and Sindh, but all around four provinces and Azad Jammu and Kashmir.

The survey reveals 11 percent banked, one percent utilizing other formal financial services, 32 percent informally served, and 56 percent financially excluded (using sub-optimal alternatives) people. Considering the former two not exclusive usage categories, it is safe to assume 43 percent as formally served population. Area wise, percentage of banked population is highest in AJK (30%) and lowest in Balochistan (4%) while it is 12 percent in Punjab, 11 percent in NWFP, 11 percent in Sindh. 'Almost twice as many as people are banked in urban than rural areas. But the issue of exclusion and access to formal and informal services is similar in urban and rural areas.' The situation of access to financial services is defined under access strand methodology designed by South African-based FinMark, which classifies target groups as banked, other formal (nonbanking financial institution services), informal, and financially excluded.

Responding to a question, "Do you try to save regularly?" only 42 percent ticked yes.

Access to finance study survey diagnosed a thin propensity of people to save in banks. Although, 56 percent of respondents said yes to a question of saving, only three percent constituted formal savers who save in banks. Otherwise, 53 percent use 'committees' and other alternatives for saving purpose. Only two percent are saving in prize bonds, and one percent in national saving scheme. Saving at home is most common practice in Pakistan. Saving at home and participation in committee are even popular among banked population. Forty-three percent of banked save at home, 24 percent participate in committee, and invest in lands, jewellery, etc. Almost a quarter of people having bank accounts withdraw funds from banks immediately, the survey found.

About financial literacy, the study notes that 60 percent Pakistani adults follow financial news. While both male and female respondents are considerably aware of basic financial terms such as bank, loan, interest, bank account, etc.-despite ratio of understanding among male is high-women are significantly less aware about sophisticated financial terms like shares, stock exchange, exchange rate, tax, etc. Fifty percent of the graduate respondents understand terms ATMs and credit cards. The usage of ATM cards by banked is 15 percent while four percent use debit and credit cards while seventy percent of total population are unaware of these financial products. Likewise, 64 percent cannot understand current and saving accounts, 20 percent postgraduates understand shares, and only three percent people understand mobile and mobile phone banking. According to the study, the public awareness about Islamic banking is significantly low. It found that only 12 percent of total respondents could distinguish Islamic banking from conventional banking. Understanding of sophisticated terms is low even among banked population, which are currently 8,606,778. Such as, 13 percent know about mobile banking and 36 percent about Islamic banking.

About the perception of consumers, the study concludes more people trust the informal financial service providers as compared to commercial bank, microfinance, and post office and their satisfaction level with formal sources is diminutive, although they accepted money transfers through their own accounts at banks least risky and easiest. No requirement of documentation attracts them towards informal sources, the study analyzes. Generally, they give importance to banks for money transactions rather than other financial services. Fifty six percent said they bank to save money, and 32 percent to keep money in secured place. A small percentage of people responded they opened up bank account in order to take loans, earn profit and income, and deposit money from employers.

Majority of respondents had negative attitude towards taking loans. According to the finding, 66 percent checked "I hate owning to money to anyone". Fifty-four percent hated debt because they thought it implied tension and worries. The study underlines that 87 percent thinks loans should be avoided as much as possible. Out of total 35 percent total borrowers, informal are 33 percent while only two percent use formal credits.

Borrowers resort to informal sources like family, friends, shopkeepers, moneylenders. The frequency of borrowing from informal sources is repetitive in short time e.g. in month.

The awareness and understanding about insurance and leasing are very low nationwide. Forty three percent have never thought of getting insurance cover while 26 percent are completely incognizant of meaning of insurance, according to survey finding.

The study propounded Pakistan is cash based economy outside the formal economic structures. It inferred from the answers of respondents that 92 percent of adult Pakistanis received their income in cash.

The study unveiled a fact that would become useful for overseas ministry and policy makers in their efforts to make strategies at par with ground realities and improve magnitude of money transfers through documented channels from overseas workers. It says "only 2.3 percent of the total population is using formal or informal modes of money transfer."

Despite that questionnaire for collecting viewpoints and random sampling that is said to increase duplicity of responses and generalize results are put under argument by social scientists, the findings of the access to finance survey with large covered area and multiple selected segments of the society may provide insight in to the financial practices of Pakistanis from demographic, psychographic, and economic dimensions.