Pakistan having 5.2 per cent of the World''s un-banked adults has recently approved a Financial Inclusion project worth Rs14.318 billion to enhance formal financial access to 50pc of the adults by 2020. Sources said that the financial inclusion and infrastructure projects approved by the Executive Committee of the National Economic Council (Ecnec) on May 10, 2017 highlighted high interest rate, refinancing and exchange risks as some of the major issues of the sector.
The proposal also identified poor social/financial services in the areas of education, health, water, shelter to a large segment of the population and some other sectors'' issues. The limited market risk management and no credit and operations risk management, weak capacity and poor service delivery of public institutions as well as the poor infrastructure of judicial institutions and poor use of ICT inadequate human resources for judicial administration, lack of co-ordination among agencies involved in debt management were also pointed out as issues in the way of financial inclusion.
The objectives of the proposed project are in line with the aims of National Financial Inclusion Strategy and will contribute in increasing access to financial services for households and businesses in Pakistan. This will be done by improving market infrastructure and institutional capacity, supporting the uptake and usage of Digital Payments and Financial Services and thirdly by improving access to financial services for micro enterprises and SMEs (MSMEs).
The project will seek to substantially increase access and usage of financial services by women and support women-owned micro enterprise and SMEs. The Ecnec was informed that (WB) engagement on financial inclusion is driven by the global commitment towards achieving Universal Financial Access (UFA). Pakistan accounts for 5.2pc of the world''s un-banked adults and is a priority country for the WB''s UFA 2020 commitment.
The WB Country Partnership Strategy (2015-19) targets improved financial inclusion of MSMEs, women and youth. Addressing inclusion reduces poverty and contributes to equitable growth. The project''s focus on women is well aligned with the CPS objective of expanding opportunities for women.
The strategic approach of the WB''s engagement in the financial sector is a combination of financial, advisory, knowledge, and convening services, complemented by investments and private sector engagement by IFC. The WBG supported the development of the NFIS, and is now providing a comprehensive package of support to enable Pakistan to achieve its targets. This includes: (a) development policy credits to support institutional and legislative reforms; (b) data and analysis to underpin more effective reforms (Consumer Protection and Financial Literacy diagnostics); (c) technical assistance to build implementation and supervisory capacity (FISF); and (d) support for critical improvements to the enabling environment (FISF, FIIP).
This Project aims at contributing and in supporting the government''s approved NFIS: (i) at the individual level by improving access and usage of digital payments and financial services. This will be done through investments, capacity building and analyses aimed at improving the financial infrastructure and the ecosystem for DTAs and the NSS and (ii) at the firm level by improving access to financial services for MSMEs.
The major component of the project include direct support to the NFIS implementation (US$ 17.5 million), supporting expansion of access points for financial services (US$ 9.4 million), improving Access to Microfinance and to Financial Services for micro, small and medium enterprises (US$ 110.1 million).
The project is aimed at addressing transparency of information on public sector decision-making, policies, actions, and performance of public institutions; addressing corporate governance and public private interface issues to protect public interest, while minimising transaction cost, improving public sector management by streamlining debt management, revenue administration, strengthening public financial administration, streamlining governance, capacity building through continuous training and skill up gradation; fairness and ease of access in Judicial, Police and Administrative services; congruence between fiscal and human resource allocation for reformed public sector management at the federal and provincial level.