The current gender gap in financial inclusion is 27.6 percent in Pakistan, according to Global Findex 2017. Policymakers often prioritise closing the gender gap in account ownership as a tool to empower women. However, research has shown that a mere bank account in itself does not lead to empowerment unless it is followed by a compelling reason to use it.
Fourth industrial revolution has brought many captivating opportunities, one of them aims to empower women through an informal variant of e-commerce. Global Consumer Insights Survey 2018 by PricewaterhouseCoopers estimated that one-tenth of worldwide sales were online. According to State Bank of Pakistan (SBP), online sales reached Rs 40 billion in FY18 following an almost 94 percent annual growth rate. Services sector is the major contributor to this online market growth and holds almost 60 percent shares in the GDP. SBP also reported that the number of merchants operating online increased from 905 to 1023 in the last quarter of 2018 only.
Commerce has long moved from conventional brick and mortar to online and now it’s taking a leap from websites to social media. In a classic e-commerce setup, products or services are showcased, ordered and processed through formal electronic channels such as websites. Whereas, in this informal variant called Social Commerce (Harris and Rae, 2009), products or services are displayed and sold through social platforms such as Facebook and Instagram using them as online stores, while payments are mostly done through cash-on-delivery. This mix of social media and business acumen connects small and micro entrepreneurs and shoppers across diverse markets, thus, opening new opportunities that were unavailable earlier.
Data from a marketing consultancy firm, Kepios, found that there are approximately 35 million active social media users in Pakistan. This is a direct outcome of recent penetration of smartphones and widespread cheaper internet infrastructure. According to one report, more than 73 percent of adult population has access to mobile phone and about 9 million of them use smartphones. Therefore, providing manufacturers, wholesalers and retailers a new space to market and reach out to wider customer base. Moreover, social channels provide access to a highly engaged audience owing to the technological advancements such as Artificial Intelligence that filters and targets audience that suits the products/service, thus, possess a strong purchasing intent.
Social-commerce is playing a crucial role in expanding digital retail industry. This conversion of Social media networks into sales platforms system allows suppliers to streamline their products and services and also bypass the need for a business registration and provides small entrepreneurs, especially women. Research has found that women have low participation in labour force participation in developing countries as they face many barriers intrinsic to cultural barriers such as limited mobility and security concerns. This setup provides them with an enormous opportunity to generate revenue with convenience and ease of doing business from the safety of their own homes with huge opportunity to work at their own pace and from their own space with minimal investment. As it reduces cost of overheads, operations and marketing while expanding clientele reach. The e-commerce market is rapidly growing especially in rural areas as a study on online shopping found that almost 35 percent of online orders were from outside the main urban areas.
Also, recently many social commerce platforms have emerged in Pakistan and are successfully operating especially for women such as Sheops and HerFloor. Social-commerce is transforming modern e-business by providing promising benefits at economic, technological and social fronts. These channels helped women in becoming financially and socially independent as they grew their personal and professional networks by using social space to create business opportunities by both offering innovative products/services and also reselling products. These start-ups have reiterated the low-cost, high sales potential in this relatively unexplored market. However, still a large percentage of e-commerce setups, estimated to almost a 60 percent, operate in the informal sector given the cumbersome process and other barriers to registering a business.
This current system mostly relies on cash-on-delivery owing to trust deficit between suppliers and buyers. It successfully meets short-term person-to-person needs, however, to make it sustainable this need to be linked with formal digital mechanisms such as e-wallets.
FinTech is innovating the financial value chain by introducing flexible products and better ways to cater to low-income segments. This link with digital payments could potentially nudge large segment of suppliers to use an account for payments to other uses such as microcredit and savings etc. FinTechs are also laying groundwork to make the payment methods more secure through digital identity verification tools, due diligence and secure data sharing streams that aim to create frictionless digital financial system. At this stage, policymakers need to outline a simple and concise e-commerce policy that ensures secure payment gateways and introduces coherent regulations. As empowerment in real terms would come from sustained financial inclusion through consistent use and engagement and not just a number of dormant accounts.