Telecom brings a breakthrough in financial sector

Published on 30th Nov, Edition 48, 2015

 

Ufone-Meezan Bank takes initiative for first Islamic branchless banking in the country

It is quite evident that the conventional approach of bricks and mortar branches will never adequately serve the millions of un-banked masses in Pakistan unless the strategy of financial inclusion is supported by the telecom sector in Pakistan.

Being an agriculture country with over 68 percent of the total population is rural-based in Pakistan, the conventional banking system hardly covers 22 percent of the population for financial services while the rest of the population was still out of the financial ambit, despite the fact that over 80 percent of the people in Pakistan have cellular phone facility and by using this growing number of cellular population the financial sector in Pakistan has moved in a right direction to use cellular phones for providing financial access and services to the huge un-banked population in Pakistan.

This is of course a meaningful use of the telecom facility, which is expected to help developing living standard and living style in Pakistan.

Ashraf Mahmood Wathra, Governor State Bank of Pakistan (SBP) while referring to what he called the exciting times where innovations such as Mobile Financial Services (MFS) are redefining limits of possibilities by transforming banking operations and replacing traditional bricks and mortar banking structures with innovative business models, the launch of Meezan Bank Branchless Banking Services in collaboration with Ufone will help boosting financial inclusion through Islamic mobile banking initiative in Pakistan.

Speaking at the formal launch of the Meezan Bank Branchless Banking Services in collaboration with Ufone, Ashraf Mahmood Wathra said that like elsewhere around the world, Alternate Delivery Channels (ADCs), especially Mobile Financial Services, have opened up opportunities for exponential growth in financial inclusion in Pakistan.

At present there are:12,000 bank branches, 95 percent of which are online, while 250,000 branchless banking agents serving as low-cost and convenient access points, to serve the needs of masses for Cash-in/Cashout, domestic remittances and bill payments. Over 9,600 ATMs have been installed which are interconnected through a local switch and 41,000 POS devices are providing payments facilities at merchant points while 42 million bank accounts have been opened and 26 million plastic cards have been issued, and over 10 million Mobile-wallet accounts offering basic financial services on finger tips.

 

However, there is no room for complacency. Pakistan, where 190 million people reside in geographically dispersed and diverse areas, only 23 percent of the adults currently avail any form of formal financial service, while access to a formal bank account is only 16 percent, while only 2 percent of adults have availed any form of formal credit.

He was of the view that the significant project jointly launched by Ufone and Meezan bank carries a significant milestone. I believe the idea of Islamic branchless banking will offer newer opportunities for financial inclusion due to three primary reasons, which include the access points of Islamic banks are even limited with around 1,800 branches including Islamic branches of conventional banks.

Meezan’s Branchless Banking offering will add 15,000 Islamic banking agent access points by 2017, adding to the tally of access points which is necessary for driving financial access and usage through low cost services in the proximity of low income households. Secondly due to Islamic banking appeal for faith based excluded segments of the population; it will truly help achieve the vision of “no one left behind” when it comes to access to formal financial services, by bringing the hitherto self excluded segments of the population under the financially included umbrella, through Shariah compliant offerings. And thirdly it is important that financial access and usage must be promoted with integrity and fairness.

FDI IN TELECOM SECTOR (US $ MILLION)
	FDI IN TELECOM	TOTAL FDI	TELECOM (%) SHARE
2003-04	207.1	949.4	21.8
2004-05	494.4	1,524.00	32.4
2005-06	1,905.10	3,521.00	54.1
2006-07	1,824.20	5,140.00	35.5
2007-08	1,438.60	5,410.00	26.6
2008-09	815	3,720.00	21.9
2009-10	373.62	2,199.44	17
2010-11	79.2	1,574.00	5
2011-12	-361.4	820.6	-44
2012-13	-404.1	1,576.00	-25.6
2013-14	429.9	1,667.60	16.3
2014-15	121	529	21
Source: PAGE Research Department

It is widely believed that Islamic products and services offer the added advantage of materiality and risk sharing, which assumes inherent fairness, as speculation is prohibited and risks are to be shared among the partners.

Ufone CEO

The launch by Meezan Bank is perfectly aligned with Pakistan’s first ever ‘National Financial Inclusion Strategy’ (NFIS) which relies on using digital financial services to increase the financially included population to 50 percent by 2020.

Regarding this new initiative Mr Abdul Aziz, President and CEO Ufone said with this new collaboration we aim to capitalize on both parties’ strengths — Meezan Bank’s expertise in Islamic banking and Ufone’s Upaisa geographic foot print to facilitate customers, making it a win-win situation for all.

With Upaisa being at the forefront in providing branchless banking services with its collaborations at various levels and Meezan Bank holding of over 50 percent of the Islamic Banking share in Pakistan, this partnership is poised to go a long way in opening new opportunities, he remarked.

Meezan Bank

Speaking on the occasion Mr Irfan Siddiqui, President and CEO Meezan Bank while underlining the need for better financial solutions for the un-banked population in Pakistan said “Meezan Bank has played a vital role in expanding access to Islamic financial services in the country. This initiative is poised to accelerate financial inclusion by adding convenience and greater reliability, deepening the role of Ufone through enhancing the value it provides to its customers and that of Meezan Bank in expanding the reach of Islamic financial services to every citizen of the country.”

We believe that we are now one step closer to our vision of establishing “Islamic Banking as banking of first choice by serving more than 60 million users, thus taking Islamic banking in the country to the next level. It is pertinent to mention here that this partnership would expand the Islamic system footprint to its maximum potential and facilitate customers to available branchless banking services with utmost ease and convenience under Islamic system. This would be the first milestone in the ambit of Islamic branchless banking in banking industry.”

The newly Chairman of Meezan Bank Mr Riazuddin also spoke about the new imitative and expressed the hope that this first Islamic branchless banking would be enabler to meet the financial inclusion strategy currently being pursued by the central bank in Pakistan by bringing ten of thousands mobile users into formal financial system of the country. He was especially flown in to attend this historic launch of Islamic branchless banking imitative.