Branchless Banking Witnesses Rare Drop in Transaction Values

The branchless banking sector in Pakistan witnessed a rare dip in transactional values in the first quarter of 2017. The branchless banking sector registered a 5.4 percent decline for the first time in the country after almost a decade.

According to the State Bank of Pakistan (SBP), the branchless banking sector saw a drop of transactional values in the period of January to March 2017. However the number of transactions grew by 5.1 percent in contrast.

The value of transactions declined to Rs 564 billion during the first quarter of 2017 as compared to Rs 596 billion recorded in the preceding quarter of 2016. On the other hand, the number of transactions increased to 140 million in January to March 2017 from Rs 133 million in October to December 2016.

The drop in the transactions are attributed to the various issues such as:

  • decline in high value transactions,
  • disturbance in the network of M-paisa after Warid’s merger with Jazz,
  • delays in payments of G2P on various accounts.

Transactions in the branchless banking system are likely to pick up in the prevailing quarter. Local remittances are expected to increase due to the month of Ramzan and Eid holidays. Afterwards, the business of branchless banking agents is likely to get a boost through tax exemption benefits in the third quarter of 2017.

In the recent Finance Bill for the financial year 2017-18, the PML-N government accepted the demand of branchless banking sector to give them relief through exemptions in withholding tax on cash withdrawal for agents associated with various branchless banking companies.

Accordingly, agents could save their amount from deduction from the account maintaining in their microfinance/ commercial bank.

In this way, the number of agents (nearly 368,738 of them) can avail the benefit.

The exemption on withholding tax has been a long-standing demand of the branchless banking sector. The exemption is expected to help agents because previously, they had to bear extra costs while paying additional tax on withdrawals of above Rs 50,000.

The withholding tax not only slowed down the business of branchless banking but it continues to impede the goal of the National Financial Inclusion Program.

M-Wallet Performance

Meanwhile, transactions through M-wallet witnessed a sharp decline of 11.6 percent in value. However they saw an increase of 31.6 percent in the number of transactions.

According to State Bank of Pakistan (SBP), the value of transactions by M-wallet decreased to Rs 165 billion during January to March 2017 as compared with Rs 185 billion from October to December 2016.

Overall, the number of branchless banking agents grew to 368, 738 from 359,806 by March 2017. The number of active BB agents also increased to 213, 068 from 210,581.

The number of account through branchless banking sector also grew tremendously to 23.68 million from Rs 19.9 million by March. The number of active accounts also surged to 11.28 million by March 2017 from 9.79 million.​

  • Id like to bring an question for readers of this artical about branchless banking.
    Should i really joing this branchless bank and stop beeing with currency converting bank ?Branchless bank offer one to one banknotes and converting one keeps using exchanges of rates.
    Any sugestions comments pls?

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