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‘Liaison with Pakistan Post to improve financial inclusion’

Business

July 4, 2020

KARACHI: Improving relationship between banks and Pakistan Post will improve financial inclusion of the underserved and unbanked population, especially in the rural areas, a SBP’s report said on Friday.

The State Bank of Pakistan staff notes said cross-country experience has shown that state-owned postal services could play a vital role in financial inclusion.

The government-owned Pakistan Post primarily provides postal services to around 20 million consumers. Its physical branch infrastructure consists of around 2,400 delivery post offices – 87 percent of these are located outside the five most populated cities. This can add to the 3,900 outlets of the Pakistan microfinance industry. The Pakistan Post had around 10,496 post offices spread throughout the country in 2018/19, according to the economic survey. “Access to formal financial institutions for the masses in Pakistan is still quite low. One of the reasons is that formal financial activities are often clustered around bigger hubs of formal economic activity; the country is large and diverse with a bulk of population engaged in the informal sector,” said the report. “Pakistan still lags behind on a number of financial inclusion indicators compared to other countries in the region and beyond. For example, account holding at financial institutions doubled in 2017 as compared to 2011, but was still far lower than the average of South Asia and the world.”

As of June 2020, the Pakistan Post had entered into a 20-year strategic alliance with Habib Bank Limited with the goal of enhancing financial inclusion. Under this arrangement, the Pakistan Post would promote the services of HBL’s branchless banking platform, while HBL would invest in the technology, infrastructure and capacity enhancement of the post office. The report said the post may have to address a few weak links first. For one thing, significant improvement in manpower capable of delivering financial services would be required. This is all the more relevant given the country’s efforts to strengthen its AML/CFT regime. The Pakistan Post was among the entities flagged in the Asia Pacific Group’s ‘AML/CFT mutual evaluation report of Pakistan’ for having grave deficiencies.

“The release of this report in October 2019 was followed by deliberations to significantly restructure the scope and operations of the Pakistan Post,” it said. “As such, Pakistan Post would have to invest in streamlining its operations to comply with regulatory measures before undertaking any new initiatives to aggressively drive postal financial inclusion going forward.” Secondly, Pakistan Post would have to invest in its technology infrastructure to stay relevant. Such investment has important and strategic externalities that outweigh the benefits in the long-run. “Provision of agriculture and livestock insurance schemes, generating local employment opportunities, and collection of financial data of previously unbanked households are some examples that may motivate investment in this legacy institution,” said the report.