Findex finds Pakistan lagging

The recently-released, third edition of global “Findex” database offers a hopeful reading. This influential World Bank database says that bank account ownership reached 69 percent of the world’s adult population as of 2017, expanding by 1.2 billion between 2011 and 2017. The growth is attributed mostly to “financial inclusion” focus of multilaterals and policies of national governments of developing economies, where account ownership had jumped to 63 percent as of 2017.

For Pakistan, there is cause for both hope and despair in the updated dataset. It is encouraging that account ownership – which, by definition includes accounts opened with financial institutions such as commercial banks, microfinance institutions and post offices, as well as mobile money accounts – had increased to 21 percent of adult population in 2017, up from 10 percent in 2011.

But that still leaves about 100 million Pakistani adults unbanked. Besides, this density is significantly low compared to the averages of South Asia and the economic grouping of lower-middle-income countries that Pakistan belongs to (see illustration).

Some progress is visible after recent SBP measures to increase bank-account uptake. Findex shows that 18 percent of adults had accounts at financial institutions in 2017, up from 8.7 percent in 2014. But the figure is lower than 68.4 percent South Asia average. More needs to be done to nudge banks to improve banking access. Similarly, branchless banking operators also need to up their game; only 6.9 percent of adults had mobile money accounts in 2017. That’s not a whole lot of improvement over 2014 (5.9%).

Beneath the low banking uptake among consumers exists a huge gender dimension. The database shows that Pakistani women are significantly under-presented in the account mix. Only 7 percent of females owned bank accounts in Pakistan as of 2017. That’s more than double the level in 2011, but the gender gap has grown over the years, too. Pakistan’s gender gap in account ownership stood in 2017 at 28 percentage points, remarkably higher than the developing-country average of 9 percentage points.

While the central bank needs to ponder over continually low account penetration in Pakistan, local telecom authorities also need to give the report a serious read. The report reveals that more than half of unbanked Pakistanis don’t have a mobile phone. That would be more than 50 million folks (50 million!) without access to mobile phone technology!

If the World Bank figure is indeed correct, it is quite the opposite to official claims of cellular tele-density in excess of 70 percent. It makes dubious all those official suggestions of “Mission Accomplished” when it comes to providing universal access to basic cellular services across Pakistan. Besides, it challenges the government’s financial-inclusion strategy that aims to financially mainstream the unbanked through mobile phones.