Ikram Sehgal Chairman Pathfinder Group and KCFR It is with great pride that I would like to present to you the best of the best from Pakistan. We’re talking about financial inclusion. We have got some outstanding leaders of the banking community here. I’m not going take away the moderator’s role of introducing them, but I will say this to you, that everything you hear about Pakistan is not true. Yes, we are in dire economic straits, but much better than other countries. After all, a growth rate of 6% is not bad when you project 4 to 4.5 percent. Every sector of the economy has made windfall profits, and the gross profit in some cases has been out of this world, but there have been challenges; bad economic management in the sense of allowing imported goods that we should not have allowed, resulting in Foreign Exchange Reserves being eaten up, and having to pay debt installments on loans taken earlier, but I think the worst was that we could not manage the prices which the farmer got and he was happy with, and the prices that were at the market side – there is a huge gap. The middleman has really taken us for hearth and home and I think that could have been managed better.
All in all, we have a full function here. We have two events here today at the Pakistan Pavilion. We have an event tomorrow where we will have a presentation by the Sindh Investment Board with the Chief Minister being the Chief Guest, but he has sent word that his name should be taken off as Chief Guest because the Foreign Minister Mr. Bilawal Bhutto Zardari has also said that he is going to come to the lunch, and then we have our traditional Pakistan Breakfast, which is the 18th version of its own – we have had it for 18 years now. I’m proud to say one thing, people have offered us finances, people who support us, but the moral support; the moral support has been outstanding and as some of the gentlemen are here, I acknowledge that. It is so encouraging that you cannot quantify it in the form of money. I’m also very grateful to a fellow director of mine from East West Institute, Zuhal Kurt; she came from Turkey, and I’m grateful to you Zuhal for being here. Of course, my long-serving family, they can be called my traveling harem, (laughter) my 5 sisters-in-law.
I must tell you the amount of work put in by the executives and people of my group – outstanding. I mean, I would like to see CEOs of companies putting up posters here, moving chairs around, Ali Shah and Salman and Tasawwur – they did that. Of course I cannot forget the operations person, the CEO of Wackenhut – Jahangir. I am happy to know that the Presidents of banks dealing with him say we will talk to Jahangir, you don’t worry, which is good. And not only that, the support staff that has come with us. I gave an incentive to some of the people who produced something that is really a miracle i.e. Asaan Mobile Account, to produce a VRG switch which is basically led by Ali Shah and we have at the moment got 16 banks on board and 4 Telcos on board. We had a lot of skepticism in the beginning and I remember going to people but I didn’t have the chance to go to the Zafar Masood sb but Shehzad and Kabir Naqvi literally had to bully their staff that it’s a good thing let’s work on it, take it. I acknowledge that the efforts that you made for it. I wanted to give them a sort of incentive so I brought about a dozen of them to Davos. People who have never been abroad in their whole lives, but they’ve come now and they’re enjoying it. And after Davos they are going to go to Germany, France, Belgium, Netherlands, before flying back to Turkey where Zuhal is promising to make their life miserable by making them work. But anyway, thank you very much. Thank you everybody. And without further ado I will give it to Ali Shah. Please, you take over. Thank you.
Ali Shah Asani, CEO iPath (Pvt) Ltd. Good afternoon everyone. My name is Ali Shah, I basically lead one of the best software companies in the world with my very young team. I’m the oldest in the brat pack and we basically work on financial and healthcare solutions. So, the topic that we’re going to talk about today is really close to my heart. I have invested nearly a decade of my life on it. That is financial inclusion, poor man’s banking; giving the people hope to survive, to get access to finance to change their lives. And very fortunately, we have a very power pack panel over here today. I’d like to introduce them first.
Our keynote speaker today is Mr. Zafar Masood, he’s the CEO of Bank of Punjab. He’s a seasoned banker and entrepreneur with over 27 years of experience in banking, entrepreneurship, development finance and corporate governance. In his current role at the bank of Punjab he is responsible for a network of 636 regular and 104 Islamic banking branches. He’s also spearheading a strategic transformation drive to steer BoP towards becoming a digitally able financial institution. He’s been recently appointed as Chairman Board of directors of Oil and Gas Development Company Limited (OGDCL.) Mr. Masood has previously served in senior positions at multinational banks within and outside Pakistan. So, welcome aboard.
Then, we have Mr. Shahzad Dada. He is the President and Chief Executive Officer of UBL, United Bank Limited. He’s one of the most prominent bankers in Pakistan with over 30 years of diversified banking experience, both in the United States and Pakistan. He brings in his exposure from both continents. Mr. Shahzad Dada started his career with Deutsche Bank in New York where he worked for over 15 years as the Managing Director in the Mergers, Acquisitions and Corporate Advisory Group. Mr. Dada then moved to Pakistan as the Managing Director of Deutsche Bank Pakistan. Since, he has been the CEO and Managing Director of Barclays Pakistan and the CEO of Standard Chartered Bank Pakistan as well, and part of the African and Middle Eastern regional team. Mr. Shahzad Dada took over the role of President and CEO of UBL in July 2020. Under his leadership, UBL became the most profitable private bank in Pakistan. UBL is also widely regarded as the market leader in innovation and has consistently won the best digital bank industry awards both in Pakistan and internationally. So, welcome aboard.
After him, we’re joined by Mr. Kabir Naqvi. He’s the President and CEO of U Microfinance Bank, Mr. Kabir has been with U Bank since September, 2015 and has been instrumental in the turnaround of the bank. He has more than 21 years of work experience to his name and continues to lead U Bank with his vigor, drive and vision. His experience entails building teams and structures from ground up, setting up new businesses with keen focus on bottom lines, establishing partnerships to take mission forward. Mr. Naqvi represents a new breed of bankers who have managed to push the evolution of in-banking while staying true to the spirit of serving the underserved and excluded population of the country. Previously, he has served as a chief of staff and Chief Financial Officer at Tameer Microfinance Bank (currently Telenor Microfinance Bank) where his career spanned over nine years. He has had extensive work experience in external and internal audit, corporate finance, and taxation. He served at Ernest and Young in Saudi Arabia, TPL Pakistan, and House of Habib. Kabir is also a fellow member of the ACCA.
Then we have Mr. Asif Riaz who is the Group Head Retail and Priority Sector Lending of Bank of Punjab. We’re also joined by. Mr. Sadmar Ali, CEO of VRG, a duly regulated fintech both by the State Bank of Pakistan and Pakistan Telecommunication Authority, and the custodian of the Asaan Mobile Account.
Then we have Mr. Aftab Rizvi from Risk Associates. He is an internationally renowned information security consultant and entrepreneur with more than 25 years of experience. He has been heavily involved in the compliance of the e-commerce industry since its establishment and is considered as one of the world leaders in information security audits and compliance. He has vast experience in reviewing and implementing compliance programs in various industry verticals, currently focused on information security compliance programs related to payment systems, and healthcare GDPR.
Then we have Mr. Muzaffar Hayat Paracha. He’s the CEO of Airlink. Mr. Hayat leads Airlink which is the biggest manufacturer of smartphones in Pakistan having manufacturing facility of leading global brands i.e. Xiaomi, Techno, itel and TCL. Airlink is also the largest mobile phone distributor in Pakistan having brands like Samsung, Xiaomi, Techno, Huawei, itel and Realme, and is also the authorized reseller for Apple devices. Airlink is the only listed company in this sector having conducted the largest private sector IPO in the history of Pakistan.
Then we have Mr. Emad Chishti. He is the CEO of Fatafat. Emad has over 24 years of experience working with large consultancies, banks, telecoms, and startups, within Pakistan and outside. Emad was the Project Manager for Easypaisa responsible for the launch. Lately, Emad manages the 30 million Euro digitalization program funded by Mastercard for a German group for digitalizing microfinance in Africa, currently, Emad is the CEO of Fatafat, a B2B to C service, digitalizing and uplifting MSMEs through digital presence and digital payments. A very warm welcome to all of you gentlemen. We would like to move forward to our keynote for of the day on financial inclusion and digital banking, which would be delivered by Mr. Zafar Masood, the CEO and President of Bank of Punjab.
Mr. Zafar Masood, President/ CEO The Bank of Punjab Before I kind of commence with my formal presentation, I must like to thank and acknowledge Pathfinder and Martin Dow Group for inviting us to Davos and to the organizers of today’s event, which is Karachi Council of Foreign Relations and Swiss Asian Chamber of Commerce. But you know, I think it’s very important to thank on behalf of our country and personally myself to Ikram Sehgal sb. I see this as a public service. It’s patriotic, really, and Ikram sb has been doing this for 30 years spending his own money and efforts. I have seen firsthand myself the way his team has worked in organizing this massive event and really Ikram sb all kudos to you and your team for doing this for Pakistan.
Now, of course, the topic of today is something which is topical, which is close to the hearts of almost everybody, touches them one way or the other directly or indirectly, but the fact of the matter is that true financial inclusion without functional deployment of digital solutions is almost impossible, given its inherent cost-saving features, and also the commonality that it brings to the table. However, there are challenges in Pakistan about increased formalization of the economy, which leads to the easy access to affordable credit, savings, insurance products and far-reaching effect on the economic growth, stability and prosperity. But notwithstanding, certain issues still persist. Effectively identifying and addressing these issues work better for the public.
Pakistan has immense potential. Great strides have been made in the domain of financial inclusion in the country. In my keynote address today, I will try and showcase what advancement has been done, what are the headwinds and what is really stored in there for the future as far as the banking overall globally is concerned but particularly in Pakistan and what is Bank of Punjab doing about it, and which one of the chief banks have taken a lead on digitization.
So a little introduction on the country and its demographics. Pakistan surely is on the development journey. The country overall, not just the government itself but the entire ecosystem, I would say, is fully committed to national and global development goals, including the UN’s Sustainable Development Goals which, one way or the other touches what I talk about later in the presentation. Pakistan is the fifth most populous country in the world with most of the population is residing in rural areas, which is 63 percent. Now, that’s very important to highlight because that then gives the opportunity for more digital initiatives to be taken on board for better accessibility and financial inclusion. Interestingly enough, Pakistan’s 61 percent of the population is between 15 years and 54 years, which is the right bankable population to begin with. But then there is another big opportunity, which is that 35 percent, the second largest bracket is below 15 years. And these are the people which are ready for tomorrow’s banking.
There are challenges which I will talk about later. But in terms of Pakistan as an investment opportunity; most of you that I have met are keen to look at it from their perspective as well. So I’ll try and capture some key features there. The Ease of Doing Business has improved 28 points between 2019 and 2020. That only happened because of the timely and prudent sort of policy measures that the government took, by virtue of which we remain the number one reformer in South Asia; really a proud moment for all of us. The key industries that one could look for investments in Pakistan right now and particularly the place that I’m sitting, there are certain direct relevance to that place is foodstuffs to start with, then we are talking about textiles which Ikram sb also mentioned, and housing and construction. Then of course, another related business to Switzerland, for example, is the tourism and logistics. Most recently, what is most relevant to the topic today is Information Technology and digitization.
Now let’s look at the payment and banking infrastructure that is out there. We have a pretty robust banking and payments infrastructure available. The mobile wallet penetration in Pakistan has been a success story. Mobile banking, internet banking, and e-commerce have undergone massive growth rates – of 119 percent, 58 percent and 225 percent in recent times respectively. The digital financial services gives a huge opportunity for a large bankable population, which I just talked about earlier. Being a nascent market, opportunities are enormous. Credit related products offering market is starved in Pakistan in terms of inclusion.
Now, taking this forward; the discussion on inclusion. Let me just give you a sense of the unique context of Pakistan with respect to financial inclusion. I’ll try and cover in this section the exposé of some of the barriers, but most significantly, the headways that have been achieved so far in this domain. So, some of the main factors and the barrier for financial inclusion, has been the high rates of economic informality. When we talk about lending products also, then the high interest rates also play a major role in terms of discouraging people to come into the formal sector because it is the difference between the formal financial sector and the informal financial sector, sort of squeezes. That leads into a high prevalence of cash-based transactions. The low penetration of banking network, is another major reason. Although we now in this day in age are talking about moving away from the physical infrastructure, but nevertheless in a country like Pakistan, I think the physical infrastructure is still important until we reach an optimal level. We seem to be far away from it. And I know Kabir shares these thoughts with me.
If you look at the global average of branch per 100,000 adults it’s around eleven bank branches. In our case, it’s ten, so we are slightly lower there. But the most significant thing is that Bangladesh, for example was one notch lower than us at 9, but they have much better advancement on the technology front and hence their requirements perhaps are not as significant as ours. We are surely lagging behind in the region against the countries like India, Sri Lanka and of course the Middle East as well. The high disparity in the in the branches is also a reason why the rural areas are still excluded and that’s a major cause of concern. But for me, the biggest cause of concern is the fact that women participation – which is 51 percent of our total population is dismal, is almost non-existent. Last number I saw it was 17% of financial inclusion, which is dismal and that certainly needs to be enhanced. We’ll talk about it later, how the role that the banking sector in general and the Bank of Punjab in particular has played in bringing them into banking sector. The core pillars for financial inclusion rest on the National Financial Inclusion Strategy that was rolled out by the Central Bank in consultation with other stakeholders in the country in 2015. The objective was to achieve universal financial inclusion, centered around leveraging mobile wallets and easy accounts, increasing access points and implementation of national payment gateways and a major role is being played by Ali’s team, Ikram sb’s group here as well, which enables the businesses to receive and manage remittances, both foreign and local in real time.
Capacity-building of the banks, which is another very important factor, but more important than that is raising financial awareness amongst the masses. It leads into another very important area, which from a regulatory standpoint is particularly more important and with increasing penetration of the digital channels, the fair treatment of the customer and financial literacy becomes very important, and that extends the outreach of financial products and services which is the eventual objective.
On the regulatory front, the prudent and timely regulatory interventions by the central bank has resulted in some massive support for people like ourselves to work on financial inclusion and take it to the next level. The key ones being; In 2014, the Central Bank developed and adopted the framework for Consumer Protection and Financial Literacy; In 2020, the landmark Banking on Equality Policy was introduced which is primarily centered around women friendly businesses and practices in financial sector, and last but not the least, the real revolution is last year only in 2021, the introduction of Raast. It is the first-ever end-to-end digital payment system, which we think will play a key role in terms of taking this whole initiative to the next level.
Key enablers and partners in this journey with us have been the Citizen Identity Management Authority, which is called NADRA, National Database Registration Authority. On the telecom infrastructure side, it’s the PTA, the regulator of Telecom industry. On tax governance authority, this is a very important element in Pakistan offering ease of documentation and trust building. And of course, the revolutionary steps of interoperability of USSD via initiatives like VRG cover the maximum outreach and tax authorities are also putting certain incentives on the table to promote digitization of the economy.
Digital banks’ building blocks – There are essentially four building blocks. One are the Omni-channel banking experience. The second one is the speed. The third one is developing an ecosystem, which is open banking and last but not the least is the data-driven contextual banking, and the whole concept of the digital banking is to curate an advanced and unique value proposition. Fastest implementation has been achieved because we have been behind in our inner digitization journey, especially from the banks like UBL, but we are catching up fast and the fastest implementation was achieved on the digital banking software, not just in Pakistan, but the entire Middle East and North Africa. We have already introduced Omni-channel experience through our digital offering called Digi BoP and you can see those Omni-channel experiences being displayed there.
On financial inclusion across all demographics, it captures our values. The Bank of Punjab is really proud to have the values like empathy, tolerance, diversity and inclusion. We truly take this to our heart and our Moto is ‘Har Fard Ka Khayal’ which in English means ‘Care for All Individuals’. In this journey, I must acknowledge our relationship and alliance with Pathfinder Group. Sehgal sb was very generous in terms of acknowledging our efforts, but really it was the efforts of Sehgal sb and his team that we have talked about a great potential for the collaborations in the future and particularly in the domain of agriculture and financial services.
BoP’s Financial Inclusion Impact: Now, for any initiative to be gauged for its essence, the assessment of their impact is absolutely key and we in the Bank of Punjab take it very seriously and I’ll just demonstrate to you how we have achieved that. There are primarily four main inclusion points I would say that we are capturing here, starting from social inclusion, whereby we have collaborated with the Punjab Social Protection Authority and designed and executed social protection initiatives offering unique products which nobody else in the market are offering right now. Starting from Khidmat Card whereby we are offering unconditional cash transfer program for persons with disabilities. We have around 95,000 registered beneficiaries there.
The second one is Zewar-e-Taleem. It’s an unconditional cash transfer initiative for young girls going to school whereby, we have over 600,000 girls registered. Then we have Bahimmat Bazurg, which is again, an unconditional cash transfer program which is sort of a dignified social pension to elderly women. Over, 74,000, registered female beneficiaries are there. This is all digitally made payment. There is no physical payment which is done. It is all done through the wallets. Then, there is a recently launched program called Aghosh Program which is a health and nutrition program, encouraging the underprivileged women to utilize health and nutrition services during the first 1000 days of the lifecycle of the child. We have 2,000 plus pregnant women registered in this program.
The most recent program that we’ve launched is a program for transgender called Masawaat Program, whereby unconditional cash transfers are done to elderly and disabled transgender persons. The last, something very close to my heart is Sila-e-Funn, an artist support program, whereby unconditional cash transfer is done to the elderly artists who have been serving the country for over 25 years, and we have 1500 female beneficiaries in this program; it is not confined to the females alone, but I’m just quoting the number for females here.
We are very proud to execute with the Government of Punjab on the entrepreneurship initiative. We established the self-sustaining revenue stream, leasing locally manufactured vehicles, starting transportation businesses of their own. Creation of 70,000 jobs particularly for women and disbursement of 41 billion Rupees to date. We look forward to the future of digitization in the Bank of Punjab; we call it the next generation banking.
So for these four inclusion pieces that we talked about, I would like to share some testimonials with you which really resonates well with the tagline, which is ‘Har Fard Ka Khayal’ banking for everyone, which you will see the impact of all those financial inclusion initiatives that were taken so far. So we talk about Metaverse space and setting up a BoP Sky Branch there. I was just looking this morning, JP Morgan is taking some initiative on that front. Standard Chartered is also evaluating but we, as an institution in Pakistan, are taking a lead on a serious digital revolution. We thought it’s important to explore that space as well and see how we can add value. So it’s a slight demonstration of how we are pursuing it is right there.
BoP is closer to becoming a future-ready digital challenger bank. Digi BoP at Metaverse will enable us to reach a new set of customers and stakeholders in a revolutionary and exciting way. Virtual reality and web 3.0 are the upcoming third generation of internet, unveiling a whole new experience of touching, true emotions and influencing customer behavior in a very natural, real-life way.
It is not just a marketing hype or a buzzword. It will be a reality, and the next big thing in banking to adopt an experience. We will soon welcome you to the future-ready state of the Bank of Punjab Digi BoP sky branch at Metaverse. Stay tuned.
Ali Shah Asani, CEO iPath (Pvt Ltd) Thank you very much. This is very encouraging to see these financial institutions work on financial inclusion, because I think hope is the biggest thing one can give to someone who is vulnerable. We’ve built an IMPS, we’ve built infrastructure, and we are driving initiatives. There are a lot of schemes which financial institutions are coming with, remote account opening, level zero account, easing KYC. You can virtually use Asaan Mobile Account, dial a short code from here, and open a bank account in under two minutes. Your KYC, all compliances, screening and listing are all complete.
Now let’s talk about the people who would be using this platform. We know that in Pakistan the target market that we’re talking about is less formally educated, less tech-savvy; so my question to you Shahzad is how do you look at driving financial institution and financial services in an environment where people are less tech-savvy and what could be done over here?
Ali Shah Asani, CEO iPath
Thank you very much. This is very encouraging to see these financial institutions work on financial inclusion, because I think hope is the biggest thing one can give to someone who is vulnerable. We’ve built an IMPS, we’ve built infrastructure, and we are driving initiatives. There are a lot of schemes which financial institutions are coming with, remote account opening, level zero account, easing KYC. You can virtually use Asaan Mobile Account, dial a short code from here, and open a bank account in under two minutes. Your KYC, all compliances, screening and listing are all complete.
Now let’s talk about the people who would be using this platform. We know that in Pakistan the target market that we’re talking about is less formally educated, less tech-savvy; so my question to you Shahzad is how do you look at driving financial institution and financial services in an environment where people are less tech-savvy and what could be done over here?
Shahzad G. Dada, President/ CEO UBL It’s a real pleasure for me and UBL to be representing in this august gathering and this forum. Ikram sb and Pathfinder along with Martin Dow Group, thank you for inviting us and giving us this opportunity. And again, this goes beyond just talking about financial inclusion and digital transformation. I think what we also trying to do is take away the myth that’s been created about Pakistan. Talk about what’s happening, and in Pakistan, a lot is happening. Hopefully, in the next half an hour, one hour through Q&A and over the course of the next couple of days, we can really demonstrate, different colleagues of mine and different Pakistanis who have come here, demonstrate to you that there’s a lot going on and it’s really a missed opportunity if you are not in this country where there’s so much going on. Today, I want to stick to the topic and to your question, I’ll come to it in a minute.
It’s a country that’s going very fast. It’s a country where there is a lot happening and just to echo one number that Ikram sb was also talking about, last year Karachi Stock Exchange – 100 top companies in Pakistan Stock Exchange. This does not include private companies, and they’re a lot of private companies that are not listed, made net profit of 1 trillion Rupees approximately. Now, that’s a very big number. Historic highs, including UBL, we had the best year in our history. So there’s a lot of money being made, a lot is going on. There is a very conducive environment for people who are willing to come there, invest their capital and take risks.
However, what we hear in different newspapers or different news channels is a different story and I can attest from my own personal experience having worked both in the international markets and in Pakistan. All the things that Zafar talked about; amazing work Zafar and his team are doing, and I’m really proud of that, the things that BoP is doing. And obviously, there are things that we are doing, there is some duplication. Some things we are going to learn from him and he’s going to learn from us. But the point is, there’s so much going on in this space. Why do we talk about financial inclusion, there’s a lot of research out there. I think, if you want to eliminate financial inequality, we need to bring people into the financial net. I think we’ve all realized that if we do the old-fashioned way, we are not going to be able to do it in the time period required, and we have seen technology as a big friend, and if you really use it effectively, we can really shortcut and really short circuit the time to get this gap minimized and this gap is there today. Again, there are lots of numbers, I can throw a lot of numbers. I have been a banker all my life, but a low percentage of our population is financially included.
Zafar talked about the branches per 100,000 people. In Pakistan, it’s around 10, in Asia, the number is around 16. So again, we are very low. If we tried to do it the brick-and-mortar way, we are not going to get there in due course, even on a payment side, even on the branches side, so we need to use our own experience. Today, there are around 50 to 70 million people still who can be bought into this universe if we do it right. There comes to your question to me, how we are going to do it. Again, our experience has been that we are in the second phase of our digital revolution. We have done the first phase, a lot of things Zafar talked about, Zafar showed the thing and we are going into the second phase and perhaps there will be a third and a fourth revolution that’s going to come. In the second phase, I think the most important thing to keep in mind is, there’s a lot of growth happening and we have all the key foundations that will help us get there. Our population is 220 million people. If we look at the amount of teledensity, 192 million or 85 percent of our population has access, if you look at the internet penetration, it is 72 million, which is around 32 percent. All these numbers are there, which tell you that there is clearly a room to grow and room to do. But again, I think some numbers to tell you what the growth is and why we are just not talking about it. Telcos; the number of subscribers last year was 10 million subscribers that came online that is 5 percent versus 3 percent which is the global average. And by the way, that number in five years has been 50 million, which is the size of the entire Spain’s population. And lastly, the cost to serve has become very accessible and easy to do.
Just on my right here, I was with Muzaffar Piracha who is going to give some comments, but he runs the largest telco, mobile set manufacturing business in Pakistan. For 8,000 rupees which is $40, you can have a mobile set that allows you to do all sorts of mobile banking on it. I think, envisioning that in 2017, UBL was the first bank to come up with an innovation lab. I welcome any one of you virtually or physically come to Pakistan, or electronically and come and see what we do. We can take any challenge, any service, any product and we run it through our Design Lab, where we really take a lot of pain upfront trying to understand what is the objective of the provider, and what are we trying to do and how do we do it keeping in mind the audience, and do it obviously in the most efficient, cost-effective manner. And alhamdulillah it has worked out brilliantly for us. We have launched a number of firsts in Pakistan, our app is one of the best not just in Pakistan, but in the region, and we’ve won multiple awards. If you haven’t, please go to ubl.com and UBL digital.
Ali Shah Asani, CEO iPath
My question to you would be how do you see the role of digital banking in financial inclusion? We’ve seen in the Western Hemisphere that digital banks really do play out very well for alternative payments for the banked population providing those more payment options. But how do you look at it from an unbanked perspective?
Kabir Naqvi, President Ubank
Thank you, Ali. I would like to introduce what we do, U Bank as a bank, we are a bank but we are a bank for the unbanked. That’s what we do for a living, all of us. And when you look at Pakistan, a country of 220 million people, and when we say only 80% are banked, we talk about bank accounts and having a bank account in calling them banked is one thing, but the real change in our view comes from providing credit and creating an impact in their productivity and income levels and graduating them.
We are very interesting organization whereby because of our parentage, we are owned by PTCL, which is the national Telecom, and we have a sister concern by the name Ufone which is a GSM arm of the group, so that is three companies in total operating in Pakistan. PTCL has about 3 million clients, Ufone has about 24 million clients and Ubank credit clients are close to half a million and about 2 million deposit clients, including mobile wallets obviously. Now when we talk about financial inclusion, we feel as a practitioner have to talk about social inclusion before you talk about financial inclusion, because when you travel the length and breadth of Pakistan, you leave Karachi, Lahore, Islamabad, 50, 100 kilometers out, it’s a different world and my team and I take the suit out and wear Shalwar Kameez, when I go we travel 5 to 6 thousand road miles, every quarter, meet our staff, the clients and that is where you get perspective. When you see malnutrition with your own eyes, when you see lack of opportunity with your own eyes, then it changes you, and then your vision obviously transforms.
When you talk about the client, I’ll share an anecdote with you, we were talking to a client one of the farmers that we’re serving and we do a lot of work in financial literacy and digital literacy out there in our branches, which is the part of our core. And we said, what if we transferred you onto an app and you were to apply for your next loan through the app and that guy obviously in Punjabi, spoke and said, would you expect me to go to the smartphone, go to maybe say, Apple Store download an app and apply for a loan. I’ll get a loan in my mobile phone. Down below is all cash based as my colleagues also spoke about so yes that’s the eventual aim, absolutely, that is where we ought to go. We want to leapfrog in many areas, also its reality that the brick and mortar will take a long time.
But what Ubank is doing, we are creating these if you may call it, sort of an oasis in the desert, a fully functional branch, where 200 kms, 300 kms, nobody’s out there, and people from different villages come in and learn financial literacy, they learn social literacy through the branches. What we’re trying to do is to change their experience and graduating them, we are collecting loans, digitally, information through a tab. We are working on AI bot for rule-based approval because in our area, there is no cash flow formal, there is no bank statement, there’s no financial statements because we work on income proxies. That’s very different because these people are working in the cash economy. So in the wake of these new licenses coming in, what we’ve done is that we are upgrading our Upaisa proposition, which is a MFS proposition with a mobile app and USSD to a full menu banking service via digital channels.
To top it up, what we’ve done is that we have added an Islamic variant into it, we are the only microfinance Bank who’s taking Islamic Banking nationwide. The problem in the past has been that the Islamic Banks are Commercial banks on the asset side, they’re going to Sukuks and they are limited. With us, it is very different, our asset is in the rural, so we are creating an Islamic based asset products in the rural Pakistan, which is the first of its kind and we’re getting phenomenal response. As far as deciding what product to offer to whom? I think a lot more has to be done by the industry to understand the client better, because if I told you, I want to sell an app and give an app based loan to someone in a field, that’s not going to happen today, maybe a rollover, but not just yet. So in this space, I think the bank space is already in my view kind of saturated and KLI, other big cities and great products are being offered by commercial Banks. But I think a lot of research needs to be done where the rubber meets the road to understand the needs and the type of the client in order to tailor the products to them, that’s where we’ll start I think.
Asif Riaz, Member Bank of Punjab I think that there is a myth that as long as this RT system is working probably true financial inclusion and inclusion of people, of the farmers into the formal segment, would not be possible. I would rather like to differ with the statement, although this is the common understanding. What I believe is that we need to come up with ideas and thoughts where we can supplement that system and avoid exploitation of the farmers. So Bank of Punjab being at the forefront in developing agriculture SME, housing, and markets, especially with regard to the financing options, we have done a lot of work in this so I would particularly like to refer to electronic warehouse receipt financing, which actually allows the farmer to, without any collateral, they just need to bring their produce to a certified warehouse, which is managed by collateral management company, and the whole system is then digitally linked with the bank. So whoever is the partnering bank would actually allow financing to the farmer against that warehouse receipt, we call it warehouse receipt financing. So what happens is earlier this farmer was forced to sell its produce to the RT at rates which were not actually viable and that would not bring any good to the farmer but now it is happening, the baby steps have been taken. Almost the entire banking industry has been taken on board, but all that happened, once Bank of Punjab has successfully completed pilots and ensured that this system is workable and this can deliver the results.
A lot of work has taken place, now we are offering electronic warehouse receipt financing and in a way that also helps support government’s agenda to avoid food wastage, which is like a one of the main issues of our agricultural segment. So this is very important that every bank if they actually start participating in this and there is awareness among the farmers which Central Bank is very keen to make it happen and they’re working day and night with the banks, so I believe this is going to be a major breakthrough.
Salman Ali, CEO VRG
By having two different licenses, we are the only company in Pakistan having two different licenses, one is the TPSP and the other is PSO PSP, which one belongs to banking side and one belongs to the telecom industry side. So by marrying these two licenses, the first time in Pakistan, in Asia, we have implemented a many-to-many model, a part of one-to-one model, so let’s take an example that ideally a JazzCash customer usually opens up an account through only a Jazz sim, but if a customer having a different sim opens a bank account in a different bank, what they will do? So this is something, the silos is actually not moving Pakistan into the real financial inclusion side, this is one of the biggest factor, so we have implemented a many-to-many solution, where any account any sim holder in Pakistan can dial a short code without having internet, without having a smartphone by using USSD technology, and open up a bank account in any of the banks, which is right now available, we have 16 banks available on the menu which is covering 92 percent of the banking space in Pakistan. So this is the biggest achievement right now we have made, but let me tell you why USSD?
I really appreciate like what Zafar said, what Kabir said, what Shahzad said that what they are doing for the masses and the technology to implement in Pakistan and especially for the underserved populations, but right now in Pakistan, there is a 192 million subscribers of Telecom industry and out of which 41% are using smartphone and 59% are using feature phones. So feature phone means there is no mobile application, there is no internet, and they are the real masses who need to be tapped and brought in to the financial inclusion ambit, and that ambit can only be right now be achieved not into silos, but having a many-to-many implementation model, and that model is being implemented by VRG successfully.
We have been mandated by the Pakistan Telecommunications Authority, World Bank, and also the Minister of Finance, to implement a scheme called Asaan Mobile Accounts scheme, Asaan means easy, easy mobile account scheme, and by virtue of this, any person in Pakistan having a National Identity number issued to them by using a sim can dial a short code and just inputting three inputs, and they can open a bank account in a real-time manner. We usually say within a minute but it’s a real-time manner without going to a bank without going through from any hefty documentation, they can open a bank account on a real-time basis.
So Kabir is investing on setting up offices in villages, and giving tabs that can also be replaced by using a good awareness to the people, the people can directly open up their bank account by themselves, by sitting at their homes. This platform can be used in financing to the farmers, just educate the farmers, and say open your bank on a real-time basis, place a real-time request, and maybe we can give you the instant loan right away, just by digitizing certain processes at the back end, so this can be done from this platform. So Ali, to answer your question, at this stage by having this model implemented in Pakistan, we have achieved to open 4 million new bank accounts in just 14 months. This is something which we have achieved and these are the new bank accounts which we have achieved.
The biggest part is, like we have processed nearly 32 billion Rupees financial transactions, this is a big achievement, thank you very much, but the real big achievement is, in Pakistan, we have the top gurus available, the top banks available. So they have the data, 8 percent to 18 percent bank accounts belong to women and that’s the maximum number 18. In our four million bank accounts as we speak, 32 percent of the bank accounts belongs to the women, so this is something which we have achieved, and also empowering women to open the bank accounts and transact digitally from their feature phone, so this is something which is right now implemented, it is live.
But not only this, we have been asked by now the central bank to work on something new by extending services on this platform, on this platform you can not only open a bank account you can also transact, you can also make fund transfer, you can pay utility bill payment, you can checks your balances and now what we are extending, we are extending the new services which is called shared services. So what Zafar and Kabir are saying that they are actually sharing their services to giving a customer, a center sitting model, this is right now available on this platform. So what we are doing is, all the 14 bank services are going to be integrated on a single platform, I still want to quote it that the railway ticketing service which UBL have, I want to give that service from that platform to all the 14 banks, which are available, without integrating to that pillar and say use this service, so this is going to be a unified services platform, first time being introduced in a many-to-many model.
On the other hand we are also addressing a very important challenge, and the very important pain point of the industry and that is agent banking. At this stage, agents belongs to a certain bank and cater only that bank’s customer, so that also gives a denial of services to most of the people and also they have to go a long way to get the agent banking on because in the remote area there is no bricks and mortars available.
Ali Shah Asani, CEO iPath Salman I’ll just come back to the agent banking because I have a question for you about that, but let’s talk a little bit about Raast, State Bank’s immediate money payment system. When State Bank basically announced Raast, a lot of existing players freaked out, saying that we’re going to lose a lot of business, there’s going to be no revenue but then eventually it turned into a very collaborative model, when the state bank is giving a lot of room to existing players, new financial institutions are also coming in. Where do you see Raast and Asaan Mobile Account cross lines with each other?
Salman Ali, CEO VRG This is a very important question, you have to understand that Raast is being made to serve people, and to have more digital transactions going on, and also to serve the financial and ambit, and also the real time settlement to serve the bank for the liquidity issues. To address the liquidity issues, so liquidity issue is good, it has been done real-time payments, nano digital free payments done, thank you very much, but what about the financial inclusion, that is still people like you, me they are right now the user of the Raast, but what about those people who are still living in the masses, like they don’t have a mobile application they don’t have a smartphone, (and these were basically the people from which Raast was developed in the first time – Ali Shah) exactly, and they don’t even have a bank account unless and until they have a bank account, how they can use the Raast services to get benefit out of it? So that is the point that, we as a VRG is collaborating with State Bank of Pakistan to give them the channel access so that the people can directly not only open a bank account but get the Raast ID created on the same platform, and use all the benefits of Raast which industry is enjoying, but it’s actually been meant for those people.
So this is the biggest thing which we are right now doing, and let me tell you Ali the last thing which I want to update this forum, is that this Asaan Mobile Account scheme, the concept paper has been presented to World Economic Forum, and the World Economic Forum last week has invited VRG and the Pathfinder Group to present the Asaan Mobile Account scheme in front of the 70 plus countries’ representatives and we have presented this thing on the platform of Pakistan. It has been very much appreciated and we have getting lots of calls, and lots of messages from the other countries who actually want this sort of solution, so this is something which we have achieved ourselves.
Shahzad G. Dada, President/ CEO UBL You are asking about agents, we deal with agents also through Omni network, think about it that you have a shelf space and what you are doing is you’re giving them more products, the shelf space is there and there’s real estate cost is being imposed. Now what you’re allowing them to do is put more products on it, so what it’s going to do is make the agent able to sell more products, the people’s products he or she is selling, the cost of processing that will come down. It’s a win-win for the agent, for the banks and for the person who’s providing the product. So I think there should be no doubt in anybody’s mind there was going to be a blockage or anything, I think it will be all encouraged because we all want, and I think this will become a universal shelf space, so go to a supermarket you’ll have all these products.
Mr. Zafar Masood, President/ CEO The Bank of Punjab There are instances as of certain frauds there and the information security and the robustness of the connectivity with the agent is the key. We have also been a victim of it and we need to make sure that there are no compromises on the way.
Kabir Naqvi, President Ubank When we talk about agents, I think it is only fair to talk about exclusivity here, now where the branchless banking players have had a bottleneck in over the last 14 years is that when I claim, I’ve got 45000, the other two players are also present on the same location. So the agent obviously is driven by the incentive, because this is not an exclusive branch or exclusive app, it’s free for all. So whoever is paying the highest amount of incentive on that particular day, and that player will be the largest player. Now PnL is another discussion we’ll talk about some other time and sustainability of this business also, but I think that has to be kept in mind when we talk about using the agent network, and this is primarily the reason why the central bank has had a push to move away from over the counter towards wallet-based transactions.
Chairman Pathfinder Group and KCFR Mr. Ikram Sehgal One of the top technology company, called the Edison Alliance named after Thomas Edison, and first thing they did was to include us as one of the 65 players in the world in the Edison alliance. The second thing which is not really understood is that if you have a new technology and that technology is going out to the world they call it the lighthouse countries. So the first set of lighthouse countries has been approved by them, but Pakistan is going to be put on the second set as a lighthouse country, because of the VRG switch. This is a huge thing as a lighthouse country.
The third thing, I would like to mention here, which I was told by my son not to use the word and I used to call it a poor man’s debit card. Poor men will never get MasterCard or VISA or whatever. The mandate that I gave to Ali many years ago was, I want your man to be able to go to a Reriwala and buy his fruits on his mobile, and that is the mandate they achieved. The Reriwala can have his Mobile account written there and with that mobile account this man can give him money, and if I’m not mistaken, even if the guy does not have money in his account, you would give an instant credit because the credit will have to be repaid.
We call it now the deprived person’s debit card, but the fact is that it’s a game changer for the poor people of Pakistan, that the man first time he has real financial access not what we had, and it’s a fact of life today. We’ve done it, I would like Salman to each of the presidents, to send that ticker, you’ll see the live ticker which tells you every three minutes how many accounts, how many transactions, etc. and the data analytics that we’re taking out from it, I don’t even talk about it. So just think about it, from 18 percent women having bank accounts to 32 percent women having bank accounts and spending money from that mobile. So I thought I’d just interject a little. Thank you very much.
Dr. Aftab Rizvi, Risk Associate First of all I would like to thank Ikram Sehgal sb and team and everyone who organized this panel and did all the efforts and invited me as well. You have asked a very good question and obviously, we are doing all of the information security and it just happens to be a coincidence that UBL, Ubank, Pathfinder, VRG, Bank of Punjab happen to be your client in information security, so one thing before I answer your question I would like to say that previously, it was said there are two realities in life, one was taxes and other was death, now there are three realities in life, and the third one is a very important one and that’s compliance. Financial sector, banking sector know pretty well that if you are not compliant, you are not compliant and State Bank or any Central Bank will be after you. Similarly, this change in technology and revolution in technology and digital banking and open banking all of those words, which were using, and obviously we are trying to use them in this environment, which is very right place. Pakistan being 220 million people, it is very important for us to understand that not only that there is a need for compliance whether it’s from MasterCard, or VISA or whether it’s from Central Bank, there is a responsibility for all business to make sure that their clients are secure. And I think this is where I have seen a lot of awareness over a period of five years. I would say that we are in the industry for the last 20 years.
But from 2016 onwards, we have seen the big change and the big change was not only because of the compliance but also from, like you said, that there were some attacks and there was more and more awareness, and it seems like cyber security is required to run the business, it’s a part of the business. Previously, I remember that when you go and talk to anyone that guys you need to do something for cyber security they would say why? Or you can be hacked? Oh we’re not hacked yet, so don’t worry about it. Now the reality is there are only two types of companies in the world, one is already hacked and the second will be hacked. There is nothing else, so better prepared we are, and better use we have of our assets. This digital banking, which we are talking about, your real assets are the customer data. Now, will you name it with the name of privacy, whether if you are in Europe, then you are talking of GDPR and all of the regulations in the world? But in Pakistan we are a little behind, but still it is your data, it is very important and as long as the financial inclusion will start, then it becomes more complicated and more complex because now you’re combining the personal data with the financial data, and you are providing this facility to those people who are very nervous. So it is responsibility of the banks and I’ve seen that there is social responsibility that banks are doing, they are sending SMS advising customers to not share this information and so on. So what we have done so far in the industry is that we have created awareness sessions. We are working with the banks for their compliance as well as for their individual banking security and their infrastructure security and so on.
In addition, there are continuous programs, so it should be continuously improved, it is not possible that if you are compliant today or some security controls are implemented today, then it will stay forever, it needs to be revisited every time. I think to answer your question, there is huge progress in Pakistan, lot of awareness and it is taken very seriously because everyone understands that the booming Fintech sector is really nothing. It will collapse very quickly if there is one attack or there is one incident which makes people uncomfortable, it’s all the confidence, it’s all the share price and the confidence, if there is a headline, and you don’t ever want to be the headline in a newspaper or media. I think this is why there is a lot of improvement and I’m very glad to see that all of the banks are taking it very seriously including Central Bank, and they are making sure that they are doing the right thing and they are protecting the vulnerable which are our people who are opening accounts and putting their money in.
Ali Shah Asani, CEO iPath Talking about local players I’d like to move to Mr. Muzaffar Hayat, there has been a lot of work in Pakistan as far as local manufacturing is concerned, local development indigenously, developing technology and your company has been involved in the local manufacturing of mobile phones. We’ve been in a situation where we said that we’ve spent billions every year importing mobile phones from abroad, and your company is the one who set up manufacturing within Pakistan for that. So I’d actually like if you could throw some light on it for us to let us know what you’re doing and what role are you playing over here?
Muzzaffar Hayat Paracha, CEO Airlink Communication First of all, I would like to thank Mr. Ikram Sehgal and Pathfinder group to give us an opportunity to be here and to speak on this forum and to explain how we can help in this financial inclusion. So being an Airlink Communication, we are the only company in Pakistan who are the manufacturers, distributors and retailers of mobile phones, and what technology is doing today, all of my friends Mr. Zafar and Mr. Shahzad and all other friends, they all spoke about the technology, and they all spoke about how they can use this mobile phone, but nobody’s thought of mobile phone, what it is doing actually in this financial inclusion, opening bank accounts. Mobile phone is playing a vital role in opening a bank accounts, for example, if today, no matter how many products you launch in the market, but how do you go to the customer?
Airlink is the one which is providing this role, which is doing this duty for over a decade we are serving the nation with the smartphones with 3G 4G mobile phones, and what I believe is, these 3G 4G phones in last two years, the government has done a new system, device identification, and registration, and blocking system and they want to tell you that Pakistan is a one of the three countries in the world, in which this system has been implemented and that is very good for the security of the banking accounts. Now every mobile phone is registered with the name of the person not only the same, so you have two checks one is the sim, second is the cell phone itself and third is the NADRA data. So some of the colleagues over here said that if to open an account they are working with the PTA, they are working with the Government of Pakistan, so I just want to tell you that the phones we are producing in Pakistan, they are as cheap as 30 dollars and they’re smartphones you can have a video call, you can have a thumb impression over there. You can use those phones and just with the thumb impression, with face recognition, and syncing with NADRA you can check all that is happening.
Ali Shah Asani, CEO iPath Speaking about social impact, we have Imad, a very seasoned professional with the background from Tameer Bank, mobile financial services, has had international exposure and now, he’s basically into e-commerce and what I would actually like if you could tell us about how you are revolutionizing payment and e-commerce with your venture.
Imad Chishti, CEO Fatafut Thank you very much, so we have been hearing a lot about financial inclusion, account opening, but in real essence if you see the numbers and if you see the real efficacy of these all accounts that have been opened, you will find out that the efficacy has been very low. The real efficacy of for example mobile wallet has been around 16 to 20 percent, so there is a huge chunk of account that have been opened but they have become dormant or churned out because of inactivity, and there are a couple of reasons to it and yes we may have difference in opinion, in terms of identifying those reasons. But based on my experience, me and Kabir share a long history with Telenor and with Easy Paisa, when you go and ask someone, so in Pakistan the economy is like that people don’t have a lot of disposable income, so you cannot expect someone to try out something for fun or just out of curiosity, they need a genuine reason why they should use a mobile wallet for example, so when we were selling, we went and out and said to people that please open a mobile account, they said fine why? Then we say that you can do bill payments, they said no my father does it I don’t do it; okay, you can do a remittance, said no I don’t do a remittance; okay, now the pitch is failed, we don’t have anything else to pitch to them. So the reason is that we are missing that use case that integrates with common person’s day-to-day life, something that integrates, well something where you can use account on a daily basis, and that something is what Ikram sb just mentioned, about going to a cart and buying fruit and paying through that card, this is what we plan to do. We plan to do it in a different way, slightly different way, slightly improvised way, not through the way lots of other startups are doing.
So we plan to tap in through B2C space, the consumer and retail space that is our entry point and then through that, we’ll leverage on to the larger high value, low volume space of B2B. So what we are doing is that we are introducing a hyper local community experience. We are creating small hot spots in the whole city and then we are connecting community in that hot spot, so the community includes MSMEs, retailers, community includes consumers there, community includes riders. So we’ll connect retailers from that community with riders from that same community and then we’ll pitch it to the consumers within that area, and the idea is that we want to empower communities and generate economic and business activities within communities, and the other idea is that which is slightly disruptive from the traditional model that we see, we will not do cash on delivery. Our services will primarily be digital payments based, and more specifically it will be digital wallet based payments, and this is where we will align with the AMA initiative and we’ll sell it as a value proposition for customer to onboard, as an AMA account holder and use these services for that purpose.
So this is how we plan to implement this and there are a lot of different offshoots that can be generated through this, when you are utilizing payment economy, you are basically creating a lot of other use cases like credit scoring, which is something that serves as a basis for nano loans and these type of loans. Right now the efficacy of the credit score that is being generated is not very high, because either we have ECIB that taps into like those large consumers, which are not so much in need of micro transactions or there’s an initiative called MFCIB which is not very well integrated, its data is not very well consolidated. So what we will be doing is that by documenting the last mile, will be empowering banks to offer different sort of low token or low size digital loans as well.
So this is some of the fundamentals that we are working on, and obviously we are leveraging heavily as part of Pathfinder family, through AMA initiative, through yourself using our own in-house in-built solutions, that will connect, gel them together, and then we’ll offer it as a value proposition to the market that what we are focusing on alongside is the customer experience, that is something that you’ll find missing from some of the competitors in the market, some big names that are already providing these B2C services. So that is a part of our mantra in terms of providing superior customer experience, whether it’s the last mile delivery, whether it’s the buyer protection. As part of Fatafat services, what we’ll also offer is that we’ll take a shout that is close to Escrow but not necessarily Escrow, but we’ll say that whatever you will experience through us we will own it end-to-end, so any issue that you face will resolve it for you, instead of letting you go around, like a headless chicken and trying to resolve your own issues. So this is just what Fatafat is all about and how we plan to digitalize and get the digital economy wheel rolling SLR at the last mile.
Ali Shah Asani, CEO iPath (Pvt) Ltd Thank you so much for your time. It was very thought-provoking, very insightful and we learned a lot from you guys today, and there’s a lot of hope and there’s a lot of development that we see in the Pakistani banking space as far as financial banking and digital banking is concerned. We would like in the future that we see more progress happening in this area, so thank you for your time, and with those remarks I’d like to close the final curtain.