The growth momentum in the branchless banking sector in Pakistan seems intact nearly for four years from the time of sectors inception. Though the exponential growth rates are gone, still the double-digit growth rates are clocking in. In the SBPs recent third issue of the BB newsletter series, an all-round performance is quite apparent with many anticipated developments being a source of optimism for the future.
The outreach of the BB sector is rapidly increasing. According to the newsletter, the agent network is growing fast, as it had reached 89 percent of the districts in the country. Of these, more than half are located in low income communities, having 90 or more retail agents there. Between January and March this year, the BB agent network grew by 19 percent to reach an exceptional figure of 26,792 agents.
Mobile accounts offer another value proposition for the BB services. In the quarter ended March 31, 2012, the number of mobile wallets crossed the one million mark, though the quarterly growth of 14 percent is very low compared to 40 percent growth in previous quarter. However, the SBP anticipates the growth to pick up in the future as more agents (currently 23.1 percent) start opening mobile accounts for customers.
The BB sectors outreach to the unbanked poor seems to be increasing, as the data show a reduction in the average transaction size to Rs.3,367 in the quarter under review. Growing technology adoption is manifested in the fact that nearly a hundred million Rupees were transferred through m-wallets.
More deposits are finding their way into the BB system, as the total deposits grew by 18 percent to reach Rs.594 million as of March 31, 2012. On an average, the number of transactions per day has also increased by an impressive 23 percent to reach 280,798. The value of 25.2 million transactions during the quarter summed up to Rs.85.15 billion, which is a massive amount of liquidity sailing through the system.
Due to lack of savings, insurance and credit services offered under the BB umbrella, the market is still transactional in nature. The quarterly volumes were dominated by low-value services like bill payments (42 percent), personal fund transfers (32 percent) and airtime top-ups (10 percent). Half of the Rs.85.15 billion value pie was contributed by bulk payments like G2P schemes, salaries and merchant payments.
Interestingly, around Rs.13.8 billion have been transferred on account of G2P payments and Rs.60 million for salary payments, using the BB platform. The G2P segment is very lucrative, and when it completely opens up will offer a large addressable market, huge scale and efficiency gains to the service providers.
The underlying goal of financial inclusion can be achieved if new players enter the fray and offer a complete and competitive suite of financial services. Moreover, a payment ecosystem where the vendors start offering payment solutions like Easypaisa and Omni would be a boon for the sector to achieve critical mass. The trend has already started.
The newsletter highlights progress on competition. Waseela Microfinance Bank (an Orascom subsidiary), has commenced its microfinance operations, and is looking forward to entering the BB sector. HBL has been permitted by the SBP to pilot its own BB services. Faysal Bank has also been allowed to pilot launch its mobile banking services for its customers. Meezan Bank and Bank Al-Falah are contemplating.