Financial inclusion through KYC process

While addressing an international conference on "innovations in digital finance for financial inclusion" organised by the State Bank of Pakistan, Federal Finance Minister Ishaq Dar stated that a draft bill on cyber crimes and terrorism funding is in its final stage and would be presented before parliament within a couple of months - a prerequisite for donor assistance as well as a requirement under the GSP plus status granted by the European Union. The bill, Dar elaborated, would boost security measures for mobile and internet banking and would support transitioning from traditional to digital banking and added that "I look forward to the day when people will be paying for their parking tickets and toll taxes on the spot through mobile wallets."
Dar correctly stated that broadening financial access was very important as "no economy or society can grow if a large part of its population does not have fair access to financial services." There is ample evidence to suggest that the practice of ruinous usury by those outside the legal financial sector continues in Pakistan, and the poor, especially those functioning at the level of the small farmer, are forced to either become bonded labour themselves or agree to their family members including minors to be bonded to work off the debt. However, it is necessary for the government to ensure that the digital financial system is not too cumbersome in terms of documentation for the user and the banks are able to comply with the 'Know your Customer' requirement of the post-9/11 banking scenario. Ensuring this, would require continuous engagement of all stakeholders.
Dar added that using digital finance channels would achieve four objectives including (i) an efficient system of government to person (G2P) and person to government (P2G) transfers, (ii) reduce the cost of the transaction, (iii) enhance the capacity to track flow of money, (iv) increase inflow of foreign remittances, and (v) revolutionise day-to-day financial dealings.
Such clearly-articulated objectives must be fully supported. Pakistan has a large parallel illegal economy that economists have quantified at as much as 50 percent of the legal economy. In addition, Pakistan's finance ministers have periodically considered enhancing documentation of the economy, on occasion, as part of donor assistance conditions and, on occasion, as an indigenous effort, but time after time these considerations have either been taken to be inferior to political considerations or simply abandoned after a concerted resistance by those likely to be impacted as a consequence. This accounts for the inability of government after government to either reduce the extent of the black economy or indeed to raise revenue. The two budgets presented by the PML-N government unfortunately did not succeed much in this regard.
The Governor SBP stated during the conference that due to initiatives taken by the central bank, Pakistan has become one of the largest branchless banking markets in the world - a fact that supports the outreach of our banking sector to ensure financial inclusion of residents of far-flung areas as well as in our villages. However, a word of caution would not be remiss of one at this point: Pakistan's literacy rates remain extremely low in villages and far-flung areas - a factor that would quite naturally impact on the numbers who can benefit from branchless banking. In this context, it may be recalled that not only several legitimate recipients of announced government assistance for families of victims of terror attacks but also victims of natural disasters have been defrauded by the unscrupulous elements because of their inability to read or write. In effect the federal government, together with provincial governments - as education has become a provincial subject - must focus on providing a minimum level of education to all children below a certain age through perhaps making their attendance mandatory.