The State Bank of Pakistan (SBP) has stressed on Pakistan Post to offer micro finance services to enhance financial inclusion and mobilize savings in the country due to its widespread outreach.
Cross-country experience has shown that state-owned postal services can play a vital role in financial inclusion of the underserved and unbanked population, especially in the rural areas, read an SBP staff report titled Enhancing Financial Inclusion through Pakistan Post.
For example, Japan stands out as a prime example of how postal financial inclusion can lead to effective mobilization of savings to finance the country’s development, through investment in infrastructure and provision of SME and housing finance, the report said.
The report highlighted that Pakistan Post currently facilitates a limited range of basic financial products and services, such as life insurance, money transfer and agency services to CDNS. It has also recently ventured into home delivery of pensions and facilitation of home remittances. In this regard, collaboration of Pakistan Post and NBP for delivery of remittances can act as a transitioning phase between traditional postal services and more modern financial services.
Doing so may also help the government to achieve some of the headline targets for financial inclusion set in the extended NFIS 2019-2023.
However, the report pointed out that Pakistan Post may have to address a few weak links first. “For one thing, significant improvement in manpower capable of delivering financial services would be required. This is all the more relevant given the country’s efforts to strengthen its AML/CFT regime. The Pakistan Post was among the entities flagged in the” Asia Pacific Group’s ‘AML/CFT Mutual Evaluation Report (MER) of Pakistan’ for having grave deficiencies.
“As such, Pakistan Post would have to invest in streamlining its operations to comply with regulatory measures before undertaking any new initiatives to aggressively drive postal financial inclusion going forward.”
“Secondly, in order to be up to date and to compete with other financial institutions, Pakistan Post would have to invest in its technology infrastructure to stay relevant. Such investment has important and strategic externalities that outweigh the benefits in the long-run. Provision of agriculture and livestock insurance schemes, generating local employment opportunities, and collection of financial data of previously unbanked households are some examples that may motivate investment in this legacy institution.”
However, the report highlighted that there is a silver lining in these aspects as Pakistan Post can carry out all of this developmental and strategic work through meaningful collaborative efforts and partnerships with various public and private sector entities.