Mar 8 - 14, 2010

State Bank of Pakistan's financial inclusion programme is producing positive outcomes in expanding penetration of banking and finance products and enveloping of underserved and un-served markets extensively across the country. This is self-evident in the arrival of one after another innovative financial products in the market. The financial innovation taken up by the banks increases asset and deposit bases of the banking industry. On the other hand, it reduces the transaction cost which is also a priority of the central bank to prevent erosion of bottom-lines of banks. In this process, it is obvious that customers get price advantage in financial services. However, the question arises that which part of bankable market becomes more beneficial of easy access to banking services. Urban and semi-urban areas that have witnessed concentration of banks in this decade have the customers whose lives are closely attached with the banking services more or less. Banks or using banking services are common in such areas. The presence of banking products is considerable in routine economics of urban customers who bring such products in to use in their daily activities-purchase of goods and services, cash withdrawal through ATM or otherwise, utility bills payments, and other financial transactions.

The benefits of convenience, time saving, and safety apart, other advantages that directly link to income of banking customers have not emerged so far however. Making banking products income source is not for the advantage of customers alone, banks can also be financially expanded through mobilizing deposits. A large bankable portion of the population of Pakistan is un-served by banks. Generally, banks in Pakistan extend the outreach of financial products through selling them. Numbers of such banks are high in the country. Other aspect of banking that is to share profits with customers is not worthwhile. The difference of mark-up of lending and deposit is highly skewed; spread is not less than seven percent which is highest in the region. The socioeconomic situation has some impacts over the predispositions of banking business since lack of productive investment opportunities gives banks reasons to pay off less to depositors. Rising non-performing loans continued to remain an excuse of banks to park money in the government securities. High returns on such investments are another important reason. It is an irony that banks do not share due profits with depositors.

Banking services in Pakistan can be categorized broadly in to two sections. First, financial services including online banking, mobile banking, debit cards, off-bank cash withdrawal etc. are offered in return of deposits. Second, returns on term deposits and lending are provided. Branch operations have become a traditional way of reaching customers after the advent of electronic modes of financial transactions, although technology undersupplied areas can still be covered through such operations. More or less, however, electronic banking is spreading across the country as electronic infrastructure is catching strength with the advent of mobile technologies. The electronic transactions are also gaining pace both in terms of numbers and amount.


According to the statistics of State bank of Pakistan, real time online branches were numbered 6,587 while number of auto teller machines reached 4,217 at the end of 2009. However, number of point of sale stood at 50,920 by yearend. The value of e-banking transactions was recorded at Rs4,136 billion as at 31st December 2009. The value of e-banking transactions was Rs3,235 billion as at 31st December 2008. Numbers of such transactions were recorded at 46,381000 by yearend. Specifically, ATM transactions were recorded at 27,255000 in number and Rs210.69 billion in value. Moreover, POS and RTOB transactions stood at 3,895000 in number and Rs18.38 billion in volume and 14,224 and Rs3,867 billion, respectively. Furthermore, numbers of transactions of debit cards that excluded ATM were reported at 7,555000. Outstanding amounts of credit cards declined to Rs21,257 million in 2009 from Rs40,523 million in 2008. Credit cards were swapped 1,632000 times in the quarter ending December 2009. Transactions through other electronic banking channels including internet, call centre, and mobile banking were recorded at 705,000 and value Rs16.70 billion.

The statistics are self-evident that banks are eying for exploring untapped bankable market by strengthening e-banking infrastructure. Mobile banking is a new concept in Pakistani financial market despite remarkable penetration of mobile phones nationwide which have covered over 90 million of population. Financial services can be delivered to customers through this technology. Especially, volume of micro credit can be enhanced substantially through mobile banking. Recently, Tameer Microfinance Bank and Telenor Pakistan went into collaboration to deliver mobile banking services to customers.

But, do banks utilize adequately money in their coffers for the economic betterment of the people? Investments in equity can improve profitability of banks. Commercial banks do not deem it opportune right now to open the faucet of strongboxes to money-starved masses. Since, the venture is not profitable usually in low volume, they are not ready to initiate. Notably, they can play a significant role in financially empowering economically marginalized people of the society with their sizeable liquidities.

Micro and SME and agriculture sectors are craving for money to augment their contributions to the economy. Specialized banks are left alone to meet the immense demands of financing in micro business sector. World over, micro financing was taken as risky business by commercial banks. Over the years, now big banks have entered in to this field. State bank's preference to delegate big banks with control of market by discouraging small banks should also involve correction of sources of profitability of banks. Banks earn profits because of high spreads in Pakistan. For example, major size of banking industry's profit of over Rs66 billion was formed by high net interest income. While banks are lifting money from account holders, they should redirect it to the masses.