KARACHI: National adoption of digital payments in Pakistan by 2025 can boost gross domestic product (GDP) by 7 percent, generate 4 million jobs and realize an additional $263 billion in deposits.
A study report titled “Realizing the promise of responsible digital payments for merchants in Pakistan,” prepared by “Better Than Cash Alliance” has suggested that Pakistan can boost digital inclusion and supply for digital liquidity by digitizing Government-to-Person (G2P) and Person-to Government (P2G) payments.
Based at the United Nations, the Better Than Cash Alliance is a partnership of governments, companies, and international organizations that accelerates the transition from cash to responsible digital payments to help achieve the Sustainable Development Goals.
Briefing on the report, Raza Matin Pakistan Lead, Better Than Cash Alliance, informed that Alliance’s report has also urged for national digital agenda and sound policymaking for financial inclusion in the country that can also unleash the potential of Pakistan’s economy.
With sufficient political will there are easy to implement financial inclusion policies and previously unbanked Micro, Small and Medium Enterprises (MSMEs) will be given the opportunity to thrive in a modernized economy, he added.
The Alliance suggested that execution of this agenda and policy making must be driven by all stakeholders through a collective effort to achieve meaningful results. “This must ensure that all of the population, including women has the opportunity to engage in digital policy making”, it added.
Raza Mateen said that is a better time for Pakistan to accelerate financial equality and digital financial inclusion for small merchants and the State Bank of Pakistan’s instant payments system, RAAST can prove vital in driving widespread adoptions of digital financial services (DFS).
In addition, the positive impact of digitization on economic growth is proven as digitizing responsibly boosts financial inclusion, allows equitable participation in the economy.
MSMEs represent over 90 percent of businesses in the country, but remain hamstrung by their dependence on cash. Bringing this sector into the digital age offers an enormous opportunity.
Half of Pakistan’s population is female, yet women-led MSMEs are marginalized and still excluded from decision making. The exclusion means the needs of their enterprises go unheard and in this situation it is difficult to maximize the potential of an economy when half of the population is structurally impeded.
Exorbitant interest rates, topping 30 percent, cripple the few financial products offered to MSMEs of which cash usage remains stubbornly high. Political instability undermines well-intended efforts to modernize the payments ecosystem and erodes trust in business owners, the report said.
Merchant digitization and its enablement is a shared responsibility that benefits all the public sector, and all types of private sector participants.
However, neither private sector actors nor state actors, such as the State Bank of Pakistan, can achieve merchant digitization alone. Pakistan possesses all the ingredients to make a success of digitization as the country’s infrastructure and policies mean that it is well placed to make significant progress.
However, success demands more than a promising combination of ingredients. It requires, among other things, a unifying vision, women-centric policies and coordinated action by multiple stakeholders that is shaped by the lived realities of the millions of micro and small merchants, the report mentioned.
The report identified 26 recommendations based on difficulty of implementation at the policy level and suggested simplification of the taxation process and encouraging policies that reduce scrutiny and compliance.
The report said that there is an immediate need for capacity building and financial education and asked all stakeholders to take collective responsibility for this purpose.
Copyright Business Recorder, 2023