05-21-2009, 06:38 AM
Thursday, May 21, 2009
By Saad Hasan
KARACHI: Out of 60 per cent Pakistanis who use financial services, only 14 per cent have access to formal financial services of banks and the rest rely on informal channels to borrow and save money, a World Bank sponsored survey showed.
Stringent loan requirements like heavy paper documentation and collateral and limited outreach of microfinance institutions are main reasons to have limited the scope of formal financing, says the study titled ‘Bringing Finance to Pakistan’s Poor’, which was launched on Wednesday.
“Biggest challenge is to understand how the informal side is able to keep its costs down,” said Tatiana Nenova, co-author of the study. “Also the informal sector uses less lengthy procedures but that could be tackled with the use of technology.”
Importantly, the survey which covered 10,000 households revealed that more than financing, the underprivileged segments of society desired avenues for placing their savings. Within the informal finance sector, 35 per cent save at home, 21 per cent in livestock and 14 per cent use committees to place their savings, the report says.
Despite that informal source of credit can be expensive, the report notes that it still has competitive advantage over formal banks and microfinance institutions. “They have advantages of being available all the time, not requiring documentation, operating outside the purview of formal authorities and not requiring security,” it said.
Going forward, the report stressed that microfinance banks would need to mobilise savings to be able to give loans to the poor. Access to finance is most constrained in rural areas, it added.
Speaking as the chief guest, SBP Deputy Governor Yaseen Anwar said central bank has introduced a new policy that requires commercial banks, with over 100 branches, to open at least 20 per cent of their branches outside big cities.
Banks, he said are being encouraged to establish low-cost sub-branches, booths and service centres, managed by skeleton staff for performing limited banking functions.
Recently a partnership between Pakistan Post and the First Microfinance Bank on a pilot scale resulted in 35,000 microfinance loans disbursed through 68 post offices in over one year, he added.
“On the basis of these encouraging results and potential, SBP has now issued permission to the bank to broaden its operations at the outlets of Pakistan Post which has a network of 13,000 post offices across the country.”
He said the State Bank’s Expanding Microfinance Outreach Strategy specifically targets the underserved market of poor income groups and envisages that Pakistan will have 3 million microfinance borrowers by 2010 and 10 million by 2015.
A Microfinance Credit Guarantee Facility has also been launched to incentivise commercial banks to provide wholesale funds to microfinance banks and institutions for on-lending to the poor and marginalised groups to improve financial outreach, he added.
http://www.thenews.com.pk/daily_detail.asp?id=178604
By Saad Hasan
KARACHI: Out of 60 per cent Pakistanis who use financial services, only 14 per cent have access to formal financial services of banks and the rest rely on informal channels to borrow and save money, a World Bank sponsored survey showed.
Stringent loan requirements like heavy paper documentation and collateral and limited outreach of microfinance institutions are main reasons to have limited the scope of formal financing, says the study titled ‘Bringing Finance to Pakistan’s Poor’, which was launched on Wednesday.
“Biggest challenge is to understand how the informal side is able to keep its costs down,” said Tatiana Nenova, co-author of the study. “Also the informal sector uses less lengthy procedures but that could be tackled with the use of technology.”
Importantly, the survey which covered 10,000 households revealed that more than financing, the underprivileged segments of society desired avenues for placing their savings. Within the informal finance sector, 35 per cent save at home, 21 per cent in livestock and 14 per cent use committees to place their savings, the report says.
Despite that informal source of credit can be expensive, the report notes that it still has competitive advantage over formal banks and microfinance institutions. “They have advantages of being available all the time, not requiring documentation, operating outside the purview of formal authorities and not requiring security,” it said.
Going forward, the report stressed that microfinance banks would need to mobilise savings to be able to give loans to the poor. Access to finance is most constrained in rural areas, it added.
Speaking as the chief guest, SBP Deputy Governor Yaseen Anwar said central bank has introduced a new policy that requires commercial banks, with over 100 branches, to open at least 20 per cent of their branches outside big cities.
Banks, he said are being encouraged to establish low-cost sub-branches, booths and service centres, managed by skeleton staff for performing limited banking functions.
Recently a partnership between Pakistan Post and the First Microfinance Bank on a pilot scale resulted in 35,000 microfinance loans disbursed through 68 post offices in over one year, he added.
“On the basis of these encouraging results and potential, SBP has now issued permission to the bank to broaden its operations at the outlets of Pakistan Post which has a network of 13,000 post offices across the country.”
He said the State Bank’s Expanding Microfinance Outreach Strategy specifically targets the underserved market of poor income groups and envisages that Pakistan will have 3 million microfinance borrowers by 2010 and 10 million by 2015.
A Microfinance Credit Guarantee Facility has also been launched to incentivise commercial banks to provide wholesale funds to microfinance banks and institutions for on-lending to the poor and marginalised groups to improve financial outreach, he added.
http://www.thenews.com.pk/daily_detail.asp?id=178604