Latest technology and business models: Dar for adopting proper risk management framework

Finance Minister Ishaq Dar Monday stressed the need for having appropriate governance and risk management framework in place to counter new threats emerging from the latest technologies and business models. Speaking at the international branchless banking conference, Dar said cyber crimes have the potential to cast an adversely pervasive impact on any technology-related business.
We must also be on guard, and commit to strengthen our laws and regulations, including anti-money laundering laws, to subvert cyber crimes and terrorist financing. Congratulating the State Bank of Pakistan for organising the branchless banking conference on 'Innovations in Digital Finance for Financial Inclusion,' Dar said he was happy to see representatives from government, banks, microfinance sector, telecom industry, and development agencies, which showed how vibrant the sector had become.
He said to achieve the goal of accelerated GDP, the present government was clearly focused on providing economic and development opportunities to grass-roots level segments, ie, included youth, women, farmers, and small entrepreneurs.
In past, Dar said, these segments have not been fairly compensated for their hard work and commitment due to lack of sufficient opportunities, adding that the Government was now serving the groups through various support initiatives. He said the government targets the most vulnerable population through cash grants under its Income Support Programme whose monthly stipend has been increased from Rs 1,000 per month in financial year 2012-13 to Rs 1,500 per month now.
In addition, he vowed that the government has put in place a number of programmes to target the youth who are encouraged to educate themselves for which fees were being reimbursed to students from the less developed areas and laptops were being provided while vocational and technical education was also being provided, besides encouraging businesses for which youth business loans were being provided.
Additionally, he said the government's initiatives to improve market structure and efficiency through modern infrastructure (ie energy generation, roads, hospitals) and innovative technologies (licensing 3G/4G spectrum) were aimed to address the constraints to growth and create a conducive environment for investments, which will create jobs for lower income people, facilitate poverty alleviation, and promote human capital development.
The Finance Minister said broadening financial access was more important than ever, as no economy and society can grow if a large part of its population does not have fair access to financial services. In that respect, he commended State Bank of Pakistan for its strategic vision and commitment to improve financial inclusion in the country, adding that SBP's approach to work in collaboration with Government, other regulators, industry, and donors deserves to be praised.
Due to which, he said that Pakistan's microfinance and branchless banking sectors have seen inflow of foreign capital and increased use of innovative technologies. Basic banking services such as bills payment, person-to-person payments, mobile wallets, G2P payments were now reaching millions of previously un-banked population through mobile phones and large agent networks spread all across the country.
"Our credit to GDP ratio is only 18%, savings rate is 13 percent, and access to financial services is estimated to be less than 20 percent - one of the lowest in the region. These figures indicate a disturbing gap which is clearly hindering development of our financial sector and the economy to its realizable potential," he maintained. He strongly believed that by using digital finance channels such as electronic and mobile banking, they could achieve multiple objectives:
Firstly, "It can lead to rapid expansion in access to financial services, which can lead to deepening of our financial system". Secondly, "Digital payment can be an efficient and transparent medium for Government's retail payments both for Government-to-person (G2P) and Persons-to-Government (P2G) payments. The efficiency of such payments have mostly been constrained due to bulk movement of actual cash or delayed bank transfers.
Furthermore managing such payments entails a significant cost associated with manual record keeping, security, and transportation. By digitising G2P payments, our Government can reduce the probability of any theft and fraud, and strengthen our e-Governance framework. The Government and State Bank of Pakistan will like to work with global agencies like UNO's Better-Than-Cash-Alliance to chart a roadmap for digitising Government's retail payments and I look forward to the day when people will be paying for their parking tickets and toll taxes on spot through mobile wallets."
Thirdly, "In addition to ease of payment, bank-led digital payments will also help track flow of money in the economy. Such tracking becomes difficult in a cash-based economy, hence leading to greater risks for money laundering and financing terrorism. I am glad to note that Nadra's cutting-edge biometric technology for identity verification is going to be soon implemented by banks to perform their Customers-Due-Diligence (CDD) procedures for opening customers' accounts and performing over-the-counter payment transactions. I am sure signing of MoU between SBP and Nadra today is a major step to facilitate the implementation of biometric verification for millions of account opening and billions of transactions in future."
Fourthly, "Digital and electronic banking can be used to increase inflow of workers' remittance from abroad to Pakistan. Despite various reforms, many beneficiaries are still facing difficulties to timely receive remittance in Pakistan through traditional banking channels. Due to this, it is estimated that a sizable share of inward remittances is still reaching our villages and towns through informal channels. We should strive to shift those payments away from informal channels to safe and convenient electronic banking channels. This will increase our remittances further which have been on an upward trend since last year. There was an increase of 13.7 percent in remittances in the financial year 2013-14 while the figures for the first four months of financial year 2014-15 are even more encouraging. In the period July to October 2014, remittances stand at $6.078 billion as against $5.276 billion in the same four months of 2013. This is an increase of 15.21 percent."
Fifthly, "Branchless banking development can revolutionise our day to day financial dealings and the government is supporting that transition. I am pleased that our government has taken steps to provide high speed internet on mobile phones through 3G and 4G spectrum, the government has laid down the critical telecommunication infrastructure for the industry to come forward and design innovative and value-added solutions not only for the mass market as a whole, but tailor-made & customised products for different socio-economic segments of society. This will revolutionise our daily experiences in terms of e-shopping, electronic commerce, and merchant payments."-PR