Upbeat on shariah-compliant modes, Pakistan has just launched Islamic branchless banking claiming it to be "the first" - globally.
At the same time, State Bank of Pakistan (SBP), the central bank, just unveiled vast opportunities for foreign and domestic investors to come into the fold of all types of conventional and Islamic banking to invest and earn big dividends.
The first to take up the Branchless Islamic Banking (BIB) are Kuwait-based Meezan Bank and Ufone, a subsidiary of Pakistan Telecommunications Corporation (PTCL), partly owned by etisalat. The new ventures will carry the brand name of "Meezan-Upaisa," and it is the only Shariah-based branchless banking service.
The other cellphone-based branchless conventional banking in the country are Mobicash Waseela Bank operated by Mobilink, EasyPaisa-Tameer launched in cooperation with Norway-based Telenor, Ypaisa-U bank of Ufone and Timepey-Askari Bank.
While launching the new BIB customer service across Pakistan, SBP governor Ashraf Mahmood Wathra said this is the first product of its kind, not only in Pakistan, but in the whole world. "We have granted the permission to launch this unique service in order to facilitate 95 per cent of Pakistanis who will like to deal only with Islamic banking services, and have remained away from the current conventional banking services, because of their Islamic faith," Wathra said.
SBP, which recently conducted a survey 'Knowledge, attitude and practices of Islamic banking in Pakistan', said there is an overwhelming, and evenly distributed, demand in the urban and rural areas of the country for Islamic banking. The demand for Islamic banking is as high as 95 per cent among the households at the retail level. "Demand stands at 73 per cent among the businessmen," according to the SBP survey, which is based on 9,000 households nationwide and includes banked and non-banked customers, and 1,000 corporates. Meezan Bank and Ufone took a full year to develop the BIB model, which has now been launched.
"With this new collaboration, we aim to capitalise on the strength of both the parties - Meezan Bank's strength in Islamic banking and Upaisa's geographic footprint in facilitating customers, making it a win-win situation for all. This is because Upaisa is at the forefront in providing branchless banking services, and its collaboration at various levels and Meezan Bank holding over 50 per cent of the Islamic banking share in Pakistan," Ufone President Abdul Aziz said.
Asher Yaqub Khan, chief commercial officer of Ufone, said Islamic branchless banking will accelerate the goal of financial inclusion of the economy to a great extent.
President and chief executive of Meezan Bank Irfan Siddiqui said his bank has played a vital role in expanding access to Islamic financial services in Pakistan. "This initiative is poised to accelerate financial inclusion by adding convenience and greater reliability, deepening the role of Ufone through enhancing the value it provides to its customers and that of Meezan Bank in expanding the reach of Islamic financial services to every citizen in the country."
The two partners - Meezan Bank and Ufone - hope that their partnership will expand Islamic system footprint to its maximum potential customers and facilitate them to avail branchless banking services with utmost ease and convenience under the Islamic system. This will be the fist milestone in the ambit of Islamic branchless banking.
"Our partnership will provide the service at 10,000 points of service across 500 cities, districts and villages. BIB will not only promote micro-financing but also finance for agriculture and small businessmen. It will also encourage savings by the general public, based on profit and loss model."
What is the size and scope of banking, and branchless banking, both in the conventional and Islamic modes? Wathra indicated this on the basis of current surveys conducted by the central bank.
Speaking at the launch of the Meezan Bank Ufone initiative he said it has opened up several new opportunities for the entire banking sector, as it will provide access to the people of low income groups. "There are 12,000 bank branches, 95 per cent of which are online, whereas 25,0000 branchless banking agents are serving low-cost and convenient access points. They are serving the needs of masses for cash-in and cash-out, domestic remittances, and bill payments."
Wathra also said that at present 9,600 ATMs have been installed, which are inter-connected through a local switch, providing payment facilities at merchant points. He said 42 million bank accounts have been opened, about 26 million plastic cards have been issued, and over 10 million mobile-wallet accounts are offering basic financial services on finger tips.
"Inspite of this big expansion of the banking services, there is no room for complacency. Pakistan, where 190 million people reside in geographically diverse areas, only 23 per cent of the adults currently avail any form of financial service. The access of people to a formal bank account is only 16 per cent, whereas only two per cent of adults have availed any form of formal credit. It is quite evident that the conventional approach of brick and mortar branches will never adequately serve the millions of unbanked masses in Pakistan," Wathra said.
SBP's recent surveys show that the market share of branchless or mobile-based, conventional banking mode Easy-Paisa is 54 per cent, United Bank's UBL-Omni 20 per cent, Mobicash of Mobilink 14 per cent and Ufone's Upaisa four per cent.
It shows that as far as the future of all types of banking services is concerned, sky is the limit. And here lies the vast money making opportunities for foreign and domestic investors and banks to make good dividends.