Uncertainties caused by the covid-19 pandemic have made finances precarious for millions across the world. Global economic downturn has led to mass unemployment and salary cuts. In developing countries, significantly low levels of financial inclusivity have worsened.
In Pakistan, millions stand on the fringes of the formal economy: 100 million people, largely women, are unbanked and there is a wide gender disparity in access to formal, regulated financial services.
Several factors have contributed to Pakistan’s low levels of financial inclusion, including low rates of financial literacy, deep mistrust towards formal institutions and lack of documentation. For women, these are compounded by cultural restrictions on their mobility and movement, and lack of education. Perceptions of gender roles that discourage women’s presence in the professional or public sphere, and which exclude her involvement in financial decision-making at home, are significant determinants of female financial inclusion, too.
These deeply entrenched structural barriers have led to a reliance on age-old informal financial solutions: committees are prevalent across Pakistan as an unregulated savings mechanism. Used by people across gender, age and income levels and premised on trust and compassion, committees allow participants to save through a forced budgeting mechanism. As people from a family or community come together to join a committee, social pressure compels members to contribute the pre-decided amount every week or month. They also present an alternative to loans and credit, circumventing the significant rates of interest charged by formal institutions.
Not only are committees popular across Pakistan, but they are also used widely in other parts of the world including India and Africa. In Egypt, they are known as gam’eyas and have been digitised by MoneyFellows, a Cairo-based start-up which was founded in 2016 and recently raised $4 million in a Series A round. In Pakistan, Oraan Tech PVT LTD, founded in 2018, has reimagined committees for the digital age to make them more reliable and secure. In Saudi Arabia, Circlys was launched to help users better manage their ROSCAs and opened its public circles for members to join in 2019.
Speaking to BR Research, Halima Iqbal, CEO and founder at Oraan said, “committees have been used by Pakistanis for generations. By digitizing them, we are offering an alternative financial service to the underserved. Hundreds of women and men have joined committees with us over the past two years and successfully saved for a number of reasons, from raising working capital for their businesses to purchasing cards and funding family weddings.”
Digitisation of committees allows people to save with others beyond their immediate communities and offers an avenue towards greater financial inclusion. Not only do they remove points of hassle and streamline transaction records but are offering a gateway to the formal economy and access to financial services.
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