What is Financial Inclusion?

 
Financial inclusion is
defined as access to
formal financial
services including
savings, credit,
insurance and
payments vis-à-vis
formal financial
intermediaries, at an
affordable cost.

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Why is Financial
Inclusion
Important?

In Pakistan, since the

early 1990s,
consistency in
economic policy
coupled with robust
financial sector reforms
has resulted in a
degree of
macroeconomic
stability and improved
access to financial
services. But despite
positive developments,
Pakistan’s financial
sector has not yet
reached sufficient
breadth or depth.

Did You Know?

 More than 17%

(27 million) of
Pakistan’s
population live
below $1 a day
 73% (116
million) live
below $2 a day
 Only 2% of the
 poor in Pakistan
have access to
microfinance
services
 The banking
sector serves
only around six
million
borrowers
(3.6% of the
population),
compared to 25
million
depositors (15%
of the
population)
 Only around one
in four Pakistani
households hold
bank and other
accessible
accounts
 On average
there is only one
bank branch to
serve 20,000
people
 Only 14% of the
rural population
is banked
whereas 67% of
the total
population
resides in the
rural areas.

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How is Financial
Inclusion Being
Promoted in
Pakistan?

As a regulator body,
SBP is deeply
committed to
promoting access to
financial services in the
sector. Besides
introducing FIP, SBP
has already introduced
 a variety of measures:

 Tax holidays for

five years newly
established
Microfinance
Banks (MFBs)
 Flexible
regulatory
regime for MFBs
 Mobile phone-
based banking
services
 Development of
Islamic Banks
 Promotion of
Small
Enterprises
financing
through
products and
credit scoring
systems
 Credit schemes
for agricultural
finance

Financial inclusion helps in reducing poverty by…

 Increases access to bank deposits that enables individuals to accumulate savings in a

safe and secure environment
 Reduces vulnerability of poorer households, by minimizing negative impacts of
income shocks
 Improves access to credit thereby improving asset base
 Decreases proportion of low-risk, low-return assets held by households for
precautionary purposes

Financial inclusion Increases economic growth by…

 Facilitating transactions
 Providing investment opportunities to all segments of the population
 Mobilizing savings
 Facilitating inflows of foreign capital (including FDI, portfolio investment and bonds,
and remittances)

Financial Inclusion promotes stability by…

  Strengthening financial institutions
 Broadening markets for financial service providers
 Allocating capital efficiently between competing uses and monitoring borrowers
 Facilitating risk management through a variety of services including insurance
 Making money transfers more efficient and quicker

Why is Financial Inclusion Important?

In Pakistan, since the early 1990s, consistency in economic policy coupled with robust
financial sector reforms has resulted in a degree of macroeconomic stability and improved
access to financial services. But despite positive developments, Pakistan’s financial sector
has not yet reached sufficient breadth or depth.

Did You Know?

 More than 17% (27 million) of Pakistan’s population live below $1 a day
 73% (116 million) live below $2 a day
 Only 2% of the poor in Pakistan have access to microfinance services
 The banking sector serves only around six million borrowers (3.6% of the
population), compared to 25 million depositors (15% of the population)
 Only around one in four Pakistani households hold bank and other accessible
accounts
 On average there is only one bank branch to serve 20,000 people
 Only 14% of the rural population is banked whereas 67% of the total population
resides in the rural areas.

Large Market Potential

There is enormous market potential for financial institutions in Pakistan spread across
different sectors of the economy as depicted below

Increasing Outreach to Borrowers

Outreach Current
(Number of Outreach as
Potential Market 
 Sectors Borrowers as percent of
(Estimates)
on March Potential
2008) Market
3.16 million potential SMEs in the
SMEs 198,442 6.3
economy *
6.6 million potential farm
Agriculture 1,354,272 21.00
households**
Mortgage
480569 6 million houses required + 8.01
Loans
 MF Loans 1,591,126 30 million potential customers ~ 5.30

Sources: SBP and PMN 

* Economic Census of Pakistan - National Report May, 2005 - There are 3.2 million business
enterprises in Pakistan out of which 99% are SMEs 
**Farm households survey – 2005 
+I&HF Department SBP 
~ Pakistan Microfinance Network

How is Financial Inclusion Being Promoted in Pakistan?

As a regulator body, SBP is deeply committed to promoting access to financial services in

the sector. Besides introducing FIP, SBP has already introduced a variety of measures:

 Tax holidays for five years newly established Microfinance Banks (MFBs)
 Flexible regulatory regime for MFBs
 Mobile phone-based banking services
 Development of Islamic Banks
 Promotion of Small Enterprises financing through products and credit scoring
systems
 Credit schemes for agricultural finance