SBP Hosts Branchless Banking Conference

State Bank of Pakistan in collaboration with UK Aid hosted a Branchless Banking Conference at Karachi.

The conference aimed to escalate required collaboration among the relevant stakeholders for proliferation of Branchless Banking services inside the country.

The conference was attend by participants from banking sector, Mobile Operators, Technology Companies, Agent Networks, Donors, Government and Regulators.

During the conference it was told that central bank is considering applications of some large retailers and mobile network operators for granting microfinance bank licenses.

In his keynote address, Syed Salim Raza, Governor, State Bank of Pakistan (SBP), said that a few large retail organizations and mobile network operators are currently in the process of establishing microfinance banks to leverage retail networks and mobile phone technology and to extend the distribution of financial services across the country.

Currently, three models of branchless banking are operating in the country, he said, adding that in the first model, known as microfinance bank kiosks and set up at retailers’ premises, more than 40,000 borrowers were approached through 68 offices of Pakistan Post.

The second model, where retailers act as microfinance bank agents, was launched in October 2009. Through this model Tameer Microfinance Bank has opened over 25,000 branchless banking customer accounts and the cumulative volume of transactions of branchless banking by the end of March stood at over Rs4 billion with over 1.3 million transactions, Salim said, adding that Tameer Microfinance Bank will also introduce foreign inward remittances.

Highlighting about the third model, the central bank governor said that it is under the supervision of commercial banks and under this model the MCB Bank had registered over 60,000 customers and transacted over Rs1 billion with over 175,000 transactions. The United Bank Limited is also undertaking branchless banking based on the selection of individual agents that will work as “direct agents”, he said.

The central bank had recently allowed Dubai Islamic Bank to offer branchless banking at convenient public locations, such as shopping malls, clubs, societies and schools.

In addition, a new model of branchless banking with great potential for expansion of the frontiers of financial access, especially in the far-flung areas of the country, is also in the pipeline, he said.

“Under this new model, a retailer or a Teleco may establish its own microfinance bank,” the State Bank governor said, adding that branchless banking will help lift the trajectory of the financial inclusion. ìIt will also reduce the transaction cost to 2 per cent against 5-7 per cent transaction cost of the conventional banking,” he said.

Initially, banks will be allowed to avail branchless banking scheme. The central bank will continue to actively engage with both the financial and non-financial players to stimulate adoption of innovative delivery channels as part of its multi-pronged strategy to expand the frontiers of financial access in Pakistan, Salim said.

Pakistan’s financial sector is passing through a transition phase, led by increasing uptake of technology solutions. “This transition can be witnessed through recent e-banking data, with the transactional volume of 46.4 million e-payments, amounting to Rs4.1 trillion during a single quarter of October-Dec 2009,” he said.

These volumes are expected to substantially grow, as Pakistan has 95 million mobile phone users as compared to 26 million bank accountholders, the governor said.

This situation pinpoints the inherent potential for mobile banking in the country and the need to leverage technology to promote financial inclusion to the geographic regions, hard to reach by the conventional banking channels, he said.

Pakistan is the first country in South Asia to have issued branchless banking regulations, providing commercial and microfinance banks a supportive regulatory environment for developing partnerships and innovative delivery channels to promote financial inclusion in the country.

Haroon Sharif, Senior Regional Adviser (South Asia), DFID, Dr Mohammed Yaseen, Chairman, Pakistan Telecom Authority, Ali Arshad Hakeem, Chairman, NADRA, also shared their views on the branchless banking during the conference.

On this occasion, Chairman PTA said that on a global scenario, almost 4 billion people are unbanked-with more than two-thirds of the un-banked population in the world’s low and middle-income countries. However, evidence from countries like Brazil, South Africa, India, and Kenya strongly suggests that there is rapid popularity of these new phenomena we call as ’branch less banking’.

Three parallel optical fibre networks in the backbone, state of art technology in the access and core networks, fibre to tehsil H/Qs are available. This huge telecom infrastructure and ample information capacity is available to licensed and regulated financial service providers to devise and introduce innovative cost effective means of introducing new segments of banking. The high population density of mobile in Pakistan is also becoming a success of technology driven thrust in branchless banking.

The PTA, he said, was closely working with the State Bank of Pakistan on the draft of ’Third Party Mobile Banking Regulation’ which would be finalized soon. It would connect all banks of the country through cellular operators for mobile transactions, he added.

He ensured that dedicated team of professionals would come up with all-exclusive regulatory environment to flourish this much required technological and financial combo for our nation.

You can download complete speech of Mr.Salim Raza (for Branch-less Banking Conference) by clicking this link

  • One interesting point that came forward was State Bank’s comment on the regulation for “inter-party” dealing. For example, Tameer dealing with MCB…turns out that they can’t do that just yet! Not till State Bank has issued a formal regulation for inter-party transactions. And that, I quote, might take around 6 months. Unquote.

    But it was indeed a very well-organized event, in terms of presenting different points of view. Job well done by SBP.

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