Savings play an integral role in promoting economic development and ensuring social welfare in any economy. Social security, in the form and shape of National Savings instruments, is the most important alternate available, particularly in the developing countries like Pakistan, in the absence of formal social security set-up.
Recent findings in the field of 'behavioural economics', provide interesting insights into the saving behaviour in developing countries. They find that individuals, rich and poor alike, have self-control and inconsistency problems. The present thinking on savings, particularly by the poor section of the society, presupposes that they are risk averse and prone to shocks, and that security, liquidity and the accessibility, are important determinants of savings. This means that the government sponsored saving schemes become even more important and critical. All saving determinants are inherently available in the products of National Savings in Pakistan; additionally, a consistent and secured stream of income are a true blessing and act as a safety net for the specific section of the society, like retired employees, etc. Investment in National Saving instruments are the best endowments, as access to a safe place to save and build assets is as important, if not more, as access to loans.
In the context of National Savings offering as a safety net, another important section of the society is women. World banking knows from its research that women are inherent savers. Women play an accepted and expected role in the household as money managers, juggling day to day needs while making sure that compulsory expenses like school fees are paid and health emergencies are covered. Although their incomes are low and unpredictable per se, they, however, manage to save on an average 10 to 15 percent of their income. Due primarily to lack of awareness, 95% of adult women don't own bank account in Pakistan and are forced to save informally in unreliable ways: at home in a drawer, by buying excess stocks for their businesses or in neighbourhood saving clubs. I urge that our women must resort on most secured instruments of National Savings.
The social impact and contribution of National Savings Organisation in Pakistan (Central Directorate of National Savings) is indeed phenomenal and we stand committed to this very cause. The reform process in National Savings is well underway and we aim to offer best in class service to our esteemed customers. National Savings has a typical set of customers who are extremely demanding, as asking for a client’s trust with hard-earned savings is an inherently different proposition than offering a business loan; hence, requiring a different set of skills in a specialised institution like National Savings which is currently providing services to 7 million customers with over Rs3.3 trillion investment portfolio.
Moving-ahead, we believe that cultivating further savings will promote financial inclusion which is all about delivering financial services at affordable costs, particularly to the sections of disadvantaged and low-income segments of the society. According to Brookings Institute's recent study, until few years back, Pakistan had among the lowest levels of formal financial services adoption in developing countries; however, the country’s increasing mobile capacity levels (particularly with respect to 45% unique subscriber-ship and 3G/4G network coverage), combined with a robust mobile money ecosystem, have helped to advance financial inclusion. The agent network experienced growth as well, with over 200,000 and growing, across the country.
Riding on the back of substantially improved technology and physical infrastructure, National Savings intend to enhance financial inclusion through it's under construction technology platform. A large majority in Pakistan are outside the formal banking system, with merely 13% financial accounts ownership amongst adults. The policy of financial inclusion sets out to remedy this by making available a basic banking 'no frills' account either with nil or very minimum balances as well as charges that would make such accounts accessible to vast sections of the population for thrift. The banks in Pakistan are looking at these accounts from a pure credit perspective. Instead, they should step-up and look at this from the point of view of meeting the huge unmet saving needs, which are almost entirely addressed by National Savings presently.
Mobile wallet is the offering that is the need of the hour and National Savings is heading towards this direction as part of its financial inclusion initiative. National Savings will capitalise on the already available biometric verification system in the country for opening and maintaining accounts and offering top-notch service to its clientele. The envisaged mobile financial services platform will be interoperable with banking accounts which enables ATMs, POS Machines and interbank funds transfer functions through mobile wallets.
The fact is that there're supply-side constraints to attract further savings in the system. Pakistan's Savings to GDP Ratio at 14.6% is half of the average of other countries in the Region. This is primarily owed to lack of technology, product diversity and consumer/ investor education.
On this important day of World Savings, we would like to assure the nation that all these aspects are being worked on a war-footing basis with the full support and commitment of the Ministry of Finance. The National Savings Organisation is pursuing an aggressive reform agenda - new products being rolled-out, integrating into the national clearing system, introducing/upgrading technology platform, etc. - to promote financial inclusion by cultivating savings and providing a vast net of social security across the country, for all and sundry alike.
You will Insha Allah witness a substantial change in the way the working of your organisation within the next 12 months. At the end, I would very sincerely like to thank all our most esteemed customers for patronising National Savings.
I and my team are committed to extending best in class service to them now and in future. The writer is Director General National Savings (Central Directorate of National Savings), Finance Division, Government of Pakistan, Islamabad