Using data for digital financial inclusion policymaking in Pakistan

Klaus Prochaska

The dynamic development of branchless banking, most notably mobile financial services (MFS), has been a significant worldwide phenomenon. And no country in the world has made it simpler for the public to monitor developments than Pakistan by providing regular data and analysis, accomplished primarily through the State Bank of Pakistan’s (SBP) Quarterly Branchless Banking Newsletter – circulated to detail the state of the branchless banking sector in the nation and uniquely offering an important chronological and periodical analytical record of branchless banking.

Since its first publication in September 2011, Pakistan has seen impressive advancements in its branchless banking sector. The number of branchless banking accounts has risen from approximately 236,000 to 3.5 million. The number of transactions per quarter has increased from approximately 15 million to more than 54 million, while the amount of agents has increased from 15,829 to 125,027. Meanwhile, there are now eight branchless banking deployments operational with few others set to launch in 2014, representing a substantial increase from mid-2011 when only two providers were active.

Now on its 10th issue, the newsletter is one example of how SBP has positioned itself at the forefront of a growing trend within the Alliance for Financial Inclusion (AFI) Network that increasingly recognizes the importance of evidence-based policymaking and the critical role of data in the policymaking process, from design and implementation to monitoring and evaluation. Armed with objective and reliable data, policymakers can more accurately diagnose the state of financial inclusion, set judicious targets, identify barriers, craft effective policies and monitor and assess the impacts of these policies.

“With the advent of branchless banking we perceived a specialized readership for a separate publication exclusively covering branchless banking analytics and developments. At the time only two providers were operational in the market (Easy Paisa and Omni), we could see prospective providers and other stakeholders wanting to learn more about it and gain market insight,” said Dr. Saeed Ahmed, Director of Agricultural Credit and Microfinance at SBP. “In addition to local players, we were also connected with our international partners and we desired to showcase the branchless banking development occurring in Pakistan. These observations provided the motivation to publish the first (newsletter).”

State Bank of Pakistan logo.

State Bank of Pakistan logo.

Having solid data at hand has helped SBP in four critical areas, which are licensing, regulation, supervision/oversight, and development. “When SBP approves branchless banking licenses to new providers, their proposals are evaluated based on their projections. Not only is the data published in the newsletter used as a source to oversee how well the branchless banking provider’s projections have materialized but close examination of data assists in highlighting existing or upcoming challenges or opportunities,” said Dr. Ahmed. Regular analysis of branchless banking progress bolsters the bank’s understanding for policy action and development guidelines for optimum market operations.

SBP is not the only one benefiting from the availability of rich data and analysis. By making their data publicly available, the bank also has affected the behavior of the private sector. The publication has aided and continues to guide the fine tuning of ongoing and upcoming related branchless banking activities, and is widely anticipated by the players to gauge their relative market positions and forward-looking approach. The bird’s eye perspective on the industry in each edition helps to nudge the players toward avenues critical for financial inclusion. Since this is the only qualitative and quantitative regular publication for ongoing branchless banking developments in the country, the newsletter has become the industry’s go-to document for quarterly insights to shape their strategy developments.

Financial regulators in other nations have also taken notice of the available data. In one instance a central bank requested to receive the format of the data collected for analysis in the newsletter.

As data is essential to identifying problem areas, improving supervision for regulators and taking timely corrective policy action, Dr. Ahmed suggests all countries with a branchless banking market start developing their databases as soon as possible.

ABOUT THE AUTHOR
Klaus Prochaska is a Senior Policy Analyst and Knowledge Manager at the Alliance for Financial Inclusion.

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