BANKING FOR ALL
FINANCIAL INCLUSION PROGRAM MUST BECOME A REALITY.
SHABBIR H. KAZMI
Jan 23 - 29, 2012
It is on record that majority of Pakistanis do not have checking accounts with the commercial banks. Millions of accountholders use the most basic service deposit and withdrawal. On top of this, a large percentage of accountholders prefer to keep money in current accounts to avoid Riba.
Small accountholders do not get good return on their deposits. While Dr. Shamshad Akhtar was Governor of State Bank of Pakistan (SBP), the decision was made to make it binding for commercial banks to pay minimum five per cent per annum return on saving accounts. In spite of this, the best effort was to follow a system whereby payment to accountholders could be the lowest.
Over the years, the SBP has been following financial inclusion program. Under this program, people are encouraged to conducting business transactions (receiving and making payments) through bank accounts. To discourage withdrawal of large sums, a levy is charged. To facilitate the accountholders withdraw amounts according to their requirements, ATMs have been installed and debt and credit cards issued. However, the system cannot operate effectively unless every individual has a bank account.
Therefore, there has to be some incentive for maintaining account, the best is paying return on deposit that is commensurate with the rate of inflation in the country. Conducting transaction should be secure, convenient, and involving low cost. While technology based infrastructural facilities i.e. branchless banking, ATMs, online and internet banking have become a norm, some of the irritating features have to be removed. These include fees charged on withdrawal of cash using online facility and Rs15 deducted on each ATM transaction conducted using 1-link facility (when machine used does not belong to the bank-issuing card). The fee is uncalled for because all the member banks are the beneficiaries because funds are kept in accounts, till the need arises for a withdrawal.
Financial inclusion program has not become a reality. To achieve this branches have to be established at convenient location, number of online banking increased, ATMs installed at shopping centers and debt cards have to be issued free of cost to each accountholder.
One of the constraints in the use of technology-based transactions is low literacy. Though efforts are made to exploit biometric options, it may take some time to convince people that such transactions are safe and secure. Introduction of scheme for payment of utility bills through mobile phones can be termed the first step in this direction.
According to the half yearly review of payment system released by the central bank, value of electric banking transactions aggregated to Rs12 trillion during July-December 2011. The volume of such transactions during the period under review reached almost 126 million suggesting that the payment system infrastructure in Pakistan has maintained an overall growth trend.
The largest channel of e-banking transactions increased both in terms of number and value, raising the share of ATM based transactions in total e-banking transactions. Addition of 466 machines increased the total number of ATMs in the country to 5,200 and conversion of 380 branches took number of Real-Time Online Branches (RTOBs) to 7,416 out of a total of 9,541 branches in the country.
The number of plastic cards grew more than six per cent to 14 million. However, total number of POS terminals declined to 37,232 from 44,383. The number of RTOB transactions grew almost 15 per cent and the value of transactions climbed 19 per cent as compared to first half of FY11. These transactions contributed 32 per cent in total volume of e-banking and 93 per cent in the value of such transactions respectively.
The overall growth of technology-based transactions may look impressive but keeping in view total population of the country, overall deposits and lending of the commercial banks, the numbers are disappointing.
It may not be wrong to say that these facilities are mostly located in urban areas where overall literacy rate is high; bulk of the rural population is still out of banking system. In large cities due to long distances, security reasons and poor law and order situation, people do not wish to carry cash. Similarly, at times visiting the branch where account is maintained is cumbersome. Therefore, ATM and online banking facilities are used.
Apart from the fact that banks charge the fees, which must be abolished, two other points need immediate attention of the banks 1) robberies at the ATMs and 2) non-availability of cash, especially during holidays.
True, banks are not responsible to contain snatching at ATMs, but they can ensure cash in the machines round the clock.
It is also necessary to bring to the notice of the central bank and the commercial banks that many vendors, especially petrol pumps and CNG stations often refuse to accept payment through credit cards due to systematic error. This lame excuse is most common during peak filling hours and on days before/after closure of CNG stations.
Some of the outlets demand additional service charges and others do not accept payment on credit cards below a specified amount. Refusal of vendors to accept payment through credit cards and charging fees are gross violation of the terms and conditions agreed between the banks and the vendors. Therefore, some actions should be taken against those vendors who refuse to accept payment through credit cards.
People love to deal with banks that offer quality services at competitive rate. It may not be out of context to include my personal pleasant surprise when a cashier of a bank, which sanctioned me a credit card, said 'we have stopped charging fee on cash payment of credit card bills'. The amount was not substantial but the statement was more pleasing.