May 23 - 29, 20

SBP Governor, Shahid H. Kardar emphasized, a few months back, the importance of the role of branchless banking in the growth of Pakistan's banking and financial sector. During the signing ceremony of a project for the promotion of UBL Omni, he told the audience that branchless banking - and not the traditional brick and mortar network - was the best option to reach the predominantly poor population of this country. The fact that we presently have more than 13,000 branchless banking outlets against 10,000 traditional branches network amply demonstrate what shape our future banking is going to take. He said that Pakistan's financial sector was experiencing a dynamic transition led by the increasing uptake of branchless banking solutions and this was the new frontier and the only affordable solution for the financial inclusion. He further said that there are hundred million mobile phone users in a country in which barely half of the population is literate which is an evidence that even such disadvantaged sections are adept at using this technology. Therefore, it will only be the poverty and limitation of our imagination to provide products and services that would be the constraints, given the versatility of technology and the rapid shrinking of costs of information and communication technology.

While e-banking particularly mobile banking has made a rapid progress in Pakistan, any amazing impact of branchless banking revolution is yet to be observed. The capital intensiveness of branchless banking - both at service-provider and service-receiver ends - and poor literacy rate stand in the way of a full-blown impact of revolution.

Just as the gap between mobile industry and IT industry growth rates is widened because of our low education base, similarly the gap between growth rates of mobile banking and overall e-banking remains quite big. The use of mobile requires only basic education while IT professionals are expected to be highly educated. Only 12 percent of our population has exposure to banking systems with just 24 million people of a population of around 180 million having a bank account. While millions may be using mobile banking facility, only half a million or even less have a formal mobile banking account.

While most of our domestic banks have made investment in e-banking, their counter-parts, the foreign banks, have not followed the suit. Perhaps they are apprehensive of the pitfalls of high-tech investment in a less-educated society.

E-banking is generally restricted to the better-educated segment of urban population. Use of internet, by itself, requires a certain level of education and technology familiarity. E-ticketing, online purchase of goods and services, account statement scanning, payment of fees and bills and use of ATM all require more than the basic ability to operate a mobile phone that has come to the people naturally with the ever-increasing teledensity in Pakistan. E-banking will flourish only with the improvement in our real literacy rate, and real literacy rate does not mean just the ability to read and write. If 63 million adults in United States banked online in 2006, it was due to a high literacy rate and a much higher Knowledge Economy Index. The telecom revolution in the wake of deteriorating education and information infrastructure levels is a typical case of lopsided and unorganized growth. The revolution owes much to the negative ways of yesteryears' PTCL when people were made to run from the pillar to the post to secure a landline connection. Their pent-up urge to communicate openly got a forceful vent when cellular phone technology knocked at their doors. They rose in vengeance and mobbed the cellular market. The teledensity went up like stock indices in a bulls' market. Our banking sector took advantage of this development by introducing mobile banking as common person's product and e-banking as a special produce product for those with a better educational background.

An article by Shaihd Javed Burki discusses the change in the views of world economists who now agree to take into account (in addition to the traditional contributors to economic growth - capital and labor) some new and vital factors such as technology, innovation and labor skills These newly added vital factors combine together into a single word "knowledge". Now the nations need to have a knowledge-based economy to be reckoned as a respectable member of the global economic community. The pioneer work done at the World Bank has resulted in the development of KEI (Knowledge Economy Index).

In order to develop this index, nations' performance in four different key areas is measured on a scale of 0-10 Among South Asian countries, India, Sri Lanka, Pakistan, Bangladesh and Nepal have indices of 3.97, 3.76, 2.05, 1.66 and 1.65, respectively.


1995 1.64 4.49 1.25 1.78 2.29
Current 1.29 4.46 1.05 1.43 2.05

The table and its data do not make a pleasant reading as we have managed during the last fifteen years to register a negative growth in all four key areas. This has happened despite the telecom and IT explosion that has blazed this country during the last eight years or so. Perhaps, the only redeeming aspect is that we are a bit of an innovative nation. Anyway, e-banking when education and information infrastructure are showing downward trends can hardly be expected to grow on a sustained and uniform basis.

The urban population, by virtue of its better literacy rate and information infrastructure, has been the major beneficiary of innovative banking products like e-banking and mobile commerce. The rural population influx to urban areas has increased the chances of success for such products.

E-banking, requiring a higher level of education and technology familiarity, is the cup of tea of the better-educated segment of society. On the other hand, mobile banking or branchless banking has swiftly gained popularity among masses particularly those overseas and domestic workers who transfer their earnings from their work place to their hometown. Since telecom and IT have great potential to develop timesaving and cost-effective synergies with other sectors of the economy, particularly the banking sector, we have seen a number of business partnerships emerging these days. One thing is certain that mobile banking and e-banking will grow at different pace. The variance in pace will depend on how fast we improve our literacy rate and educational standards.