State Bank of Pakistan (SBP) Governor Shahid H. Kardar on Monday launched the £10 million Financial Innovation Challenge Fund (FICF) and unveiled the first round of FICF on Government to Person Payments (G2P). “The banks, public sector institutions, microfinance institutions, government agencies, pension funds and academic institutions are invited to apply to promote G2P payment through bank accounts at branchless banking outlets and also provide other financial services to the G2P payments beneficiaries,” he told the conference.
In his key note address at the ‘Branchless Banking: Government to Person Payments (G2P) Conference 2011’ and launching of ‘Financial Innovation Challenge Fund’ at the SBP, he said FICF would provide grants to foster innovations and test new markets, lower costs of service delivery, enable systems and procedures to become more efficient and provide new ways of meeting the unmet demand for financial services. Kardar said in Pakistan, Government to Person Payments (G2P) had typically been geared towards location-specific cash payments.
“This system is due to limited options, as recipients lack bank accounts and banks have few accessible branches for cash disbursement, he said and added that with the rise of branchless banking models; there were new technology based payment options, which were convenient, safe and affordable.” He said despite recent experiments under the Benazir Income Support Program (BISP), Watan Card and World Food Program, there was room for further experimentation.
“Hence, broader and deeper alliances between government agencies and financial service providers would leverage the existing banking and agent networks to engage in the distribution of G2P payments, these steps will not only make G2P payments easier but, also bring more people under the ambit of the financially served,” Kardar added.
The SBP governor said the eventual aim of G2P payments is to leverage an enhanced payment mechanism and attract recipients of government payments into the sphere of banking and financial services. Kardar also highlighted the key benefits of automating G2P payments saying this would reduce the time lag in delivery and monetary inefficiencies due to leakages and corruption in the system leading to substantial savings and greater government credibility and allow better targeting of subsidies while leveraging national infrastructure for identification and verification; enhance scope of financial inclusion for banks to build financial services on top of payments through basic store of value accounts.
“Besides, the e-payments also assist small businesses such as grocery stores and agents to create new opportunities in existing business infrastructures and enable small business owners to earn commission for providing an automated service point while the additional service helps attract an increased number of customers,” he said. The outcomes will not just be direct but also indirect because of externalities, whose benefits would be difficult to quantify but should be around one percent of GDP, he added.
He said SBP had been actively promoting branchless banking as the way forward for financial access to the low income markets. “Two transformational branchless banking initiatives (Tameer EasyPaisa, UBL Omni) have been launched,” he said adding these models were facilitating bill payment, domestic/home remittances, and m-wallets accounts to the financially excluded segments. “The combined retail network of the two models is currently at 17,000 retail agents and exceeds the branch network of the banking system.” Kardar said the Microfinance Credit Guarantee Facility under the Financial Inclusion Program (FIP) had been successful linking the wholesale (commercial banks) funding market with the microfinance sector.
