Bringing Finance to Pakistan's Poor

Tatiana Nenova

Description

Although access to financing in Pakistan is expanding quickly, it is two to four times lower than regional benchmarks. Half of Pakistani adults, mostly women, do not engage with the financial system at all, and only 14 percent have access to formal services. Credit for small- and medium-size enterprises is rationed by the financial system. The formal microfinance sector reaches less than 2 percent of the poor, as opposed to more than 25 percent in neighboring countries. Yet it is the micro- and small businesses, along with remittances, that help families escape the poverty trap and participate in the economy.
'Bringing Finance to Pakistan's Poor' is based on a pioneering and comprehensive survey and dataset that measures the access to financial products by Pakistani households. The survey included 10,305 households in all areas of the country, excluding the tribal regions. The accompanying CD contains summary statistics.
The authors develop a picture of access to and usage of financial services across the country and across different population groups, and they identify policy and regulatory priorities. Reform measures in Pakistan have been timely, but alone are not enough; financial institutions have lagged behind in adopting technology, segmenting customer bases, diversifying products, and simplifying processes and procedures. Gender bias and low levels of financial literacy remain barriers, as is geographical remoteness. However, the single strongest cause of low financial access is lack of income-not location, education, or even gender.
'Bringing Finance to Pakistan's Poor' will be of great interest to readers working in the areas of business and finance, economic policy, gender and rural development, and microfinance.

Sujets

• Finance
• Microfinance
• Remittance
• Rural development
• Gender
• Technology
• Mobile banking
• Crédit
• Information and communications technology

Informations

• Publié par: world-bank-publications
• Publié le: 13 novembre 2009
• Nombre de lectures: 11
• EAN13: 9780821380321
• Langue: English
• Poids de l'ouvrage: 2 Mo

Extrait

Tatiana Nenova
Cecile Thioro Niang
with Anjum AhmadBringing Finance
to Pakistan’s PoorBringing Finance
to Pakistan’s Poor
Access to Finance for
Small Enterprises and the
Underserved
Tatiana Nenova
Cecile Thioro Niang
with
Anjum Ahmad
Washington, D.C.© 2009 The International Bank for Reconstruction and Development / The World Bank
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Washington DC 20433
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ISBN: 978-0-8213-8030-7
eISBN: 978-0-8213-8032-1
DOI: 10.1596/978-0-8213-8030-7
Cover photos: © World Bank/Curt Carnemark
Library of Congress Cataloging-in-Publication Data
Nenova, Tatiana
Bringing finance to Pakistan’s poor : access to finance for small
Enterprises and the underserved / Tatiana Nenova, Cecile Thioro Niang ; with
Anjum Ahmad.
p. cm
Includes bibliographical references and index.
ISBN 978—0-8213-8030-7 - - ISBN 978-0-8213-8032-1 (electronic)
1. Microfinance—Pakistan. 2. Small business—Pakistan—Finance. I. Niang,
Cecile Thioro. II. Ahmad, Anjum. III. Title.
HG78.33.P18N46 2009
332.7095491—dc22
2009021680Contents
Acknowledgments xi
Abbreviations xiii
Executive Summary xv
1 Overview, Financial Market Structure, Regulations, and Policies 1
Expanding Access to Finance, Links to Growth, and Poverty Reduction 1
Objectives of the Report 3
Pakistan—A Brief Market Overview 5
Banking Sector 7
Microfinance 14
SME Finance 17
Remittances 19
Financial Inclusion and the New Financial Regulatory and Technological Infrastructure 20
2 Access to Finance: Evidence from the Demand Side 31
Low Overall Access to Finance 31
Considerable Variability of Financial Access across Rural/Urban Areas, Provinces, Income, Gender,
and Other Population Characteristics 33
High Interest in Financial Services and Low Financial Literacy among Rural, Lower-Income, and
Female Groups 38
Low Bank Access Nationwide, Driven by Income Constraints and the Lack of Information and
Financial Education 40
Informal Financial Services—More Accessible and Less Complex 45
Savings and Investment—Popular, but Mostly Informal 48
vContents
Mostly Informal Borrowing, Strong Aversion to Debt 49
Insurance 53
Little Use of Check Services beyond Government Payments 54
Suggested Strategies for Expanding Access to Finance for the Underserved 56
3 Access to Finance for the Underserved 83
The Microfinance Sector 84
Providers of Financial Services 85
Products 89
Microfinance Clients and Credit Growth 90
Sources of Financing 90
MFI Performance 91
Microfinance and Mobile Telephone Technology in Pakistan 92
Informal Finance 94
Regulation 97
Growing the Microfinance Sector 98
4 Improving Financial Access for Small and Medium Enterprises (SMEs) 107
Access to Finance for SMEs: Supply-Side Evidence 108
Access t Demand-Side Evidence 114
Constraints to Improving SME Access to Finance 121
Helping Banks Serve SMEs 126
5 Harnessing Remittances for Access to Finance 145
Overview of the Remittance Markets 146
Market Players 146
Distribution of Remittances by Region and Income Level 157
Determinants of Remittances and Historical Trends 160
Usage Patterns and Service Fees 162
Outreach and Scope of Remittance Technologies 163
Policy and Regulatory Framework 168
Suggested Avenues for Action 172
6 Expanding Access to the Underserved: An Action Plan 185
The Role of the Private Sector 185
The Role of the Public Sector 190
The Role of Public-Private Partnerships 192
viContents
Annex to Chapter 1 27
Annex to Chapter 2 61
Annexes to Chapter 4 129
Annex 4.1 Sample Description of KfW SME Survey 129
Annex 4.2 Framework for Movable Collateral in Pakistan 131
Annex to Chapter 5 177
Appendix A Data Methodology and Calibration 195
Variable Description 211
Bibliography 215
Index 225
Boxes
1.1. Finance and Link to Growth 2
1.2. Household A2F Survey for Pakistan (Demand-Side Data) 4
1.3. Other Programs in Pakistan for Financial Inclusion 23
2.1. Facts about Segmenting Pakistani Female Clients 36
3.1. The Story of Microfinance in Pakistan 84
3.2. Lessons from Successful Postal Financial Systems 87
3.3. Case Study: Technology Innovations Have Improved Back-End Processing
and Expanded Delivery Channels in the Microfinance Value Chain 102
3.4. Basic Banking in India, Mexico, and South Africa 104
4.1. SME Bank 111
4.2. National Bank of Pakistan’s SME Lending 113
4.3. How Big Is the Potential Market for Providing Credit to SMEs? 116
4.4. China SME Lending Project 125
5.1. A Closer Look at Habib Bank Unlimited 150
5.2. Innovative United Bank Unlimited Products 151
5.3. Zarco Exchange: Branching Out, Including Online 152
5.4. Indian Nongovernmental Organization Helping Domestic
Remittances 164
5.5. Mobile Banking: G-Cash (Philippines) and M-Pesa (Kenya) 166
5.6. Kiosks to Help Rural Outreach 171
Figures
1.1 Deposits, Loans, and Assets of the Banking System (Rs billion) 7
1.2 Bank Credit by Sector 9
1.3 Trends in Saving Rates 9
1.4 Banking Sector Penetration 11
viiContents
1.5 Banking Sector Performance 12
2.1 Pakistan Access Strand 32
2.2 Share of Banked, by Province 35
2.3 Women and Microfinance 35
2.4 Product Penetration 38
2.5 Cash-Based Income across Sectors 42
2.6 Product Penetration 43
2.7 Cost of Bank Access 45
2.8 Reasons for Participating in a Committee 47
2.9 Government/Private Savings Accounts 49
2.10 Requirements before Receiving a Loan 52
2.11 Sources of Funding of Emergency Payment 54
2.12 Reasons for Not Having Insurance 55
2.13 Means of Receiving Income 55
3.1 Number of Borrowers and Loan Portfolio by Lending Methodology 89
3.2 Sources of Financing for MFIs 91
3.3 Average Loan Size 92
3.4 Cellular Penetration and Projected Mobile Telephone Trends by Province 94
4.1 Access to Finance for SMEs in Pakistan, India, and Bangladesh 115
4.2 External Sources of Working Capital 118
4.3 Exterces of Fixed Capital 118
4.4 Loan Application and Disbursement by Firm 119
4.5 Bank Access Increases with a Wider Range of Acceptable Assets to Secure a
Loan 122
5.1 International Formal Remittances 147
5.2 Remittances—International Comparison 147
5.3 Top Domestic Remittance Channels 155
5.4 Remittances to Pakistan by Country 158
5.5 Overseas Workers by Category 161
5.6 Mobile Consumer Base by Province 165
5.7 Mobile Penetration by Province 165
Tables
1.1 Basic Financial Indicators, International Comparison 6
1.2 Breakdown of Loans (Domestic Operations) by Sector 8
1.3 Comparative Position of Number of Branches in Pakistan (June 2008) 13
1.4 Rural Credit Market 15
1.5 Farmer Access to Finance 15
1.6 Microfinance Outreach in Pakistan 15
1.7 Islamic Banking Players 17
1.8 Credit to Private Sector and Growth in Lending 18
2.1 Access to Financing, by Service 33
2.2 Financial Literacy 39
viii 2.3 Literacy Measures in Rural and Urban Areas 40