The lack of broad-based financial inclusion is one of the key reasons Pakistan’s progress is being held back. In fact, according to the World Bank, globally Pakistan ranks in the lower echelons of the financial inclusion ladder. Less than 25% of the adult population has access to credit, and over 50% of the population is unbanked. Yet, financial inclusion is a fundamental right for the people of Pakistan, a fact that has been overlooked by successive governments and commercial institutions. 

Financial inclusion is the gateway to sustainable financial health for the most underserved communities. Although it starts on an individual basis, the more people in the ecosystem pull together the better. Society can begin to achieve financial health when more of the underserved are included in the ecosystem. Pakistani women are especially held back and their financial inclusion is dismal, despite the fact they make up almost half of the population. The prevailing cultural norms don’t help either, as women are expected to have limited interactions with people outside the household. They are denied loans for training or starting female-owned businesses. Overall, increased financial inclusion will uplift people from poverty, eventually graduating them to a much more meaningful middle class. It will have a positive domino effect on issues like hunger, health and well-being and lead to greater gender equality as well as better education, better work conditions and better economic growth. Arguably, the financial sector has the most significant role to play in the development of Pakistan.

Yet, for banks, risking financial inclusion with less prosperous audiences will always be an unattractive choice as long as they can reap windfalls elsewhere because of the way Pakistan’s financial system is structured. However, times are changing as banks have recently had exorbitant taxes slapped on them and which is why I feel it is high time for Pakistani financial institutions to up their game. Beyond the social good, casting a wider financial net is critical to ensuring the long-term growth and sustainability of the financial institutions themselves. The opportunity is exponential for financial institutions and transformational for the people. Financial institutions need to put more skin in the game; it is not just about making financial inclusion and credit available to the financially excluded, but about making it available at a cost that is practical and accessible.

Most banks deploy some form of Corporate Social Responsibility (CSR), and a robust plan aimed at increasing financial inclusion can help them deliver against most of the Sustainable Development Goals (SDGs). This is significant because delivering against SDGs will align CSR with the country’s goals as well as global goals. Increased commitment towards financial inclusion will also help differentiate banks and fintechs from their competition, especially given that product differentiation is next to impossible because of the way the financial industry is regulated. What matters is not about how prestigious a financial brand is, but about what the brand stands for. 

Beyond differentiation, financial inclusion represents an opportunity for sustained growth by addressing a huge unmet need. Yes, it entails risk as financial inclusion implies the provision of credit facilities (only available at exorbitant interest rates because of the lack of collateral the financially excluded have to pony up), but it is a short-term risk with a massive longer-term opportunity as uplifted populations are drawn to financial brands that put their skin in the game. 

Here are some approaches that financial institutions can adopt to become better at inclusion:

1 Behaviour Change. The financially excluded trust cash; it is tangible and can be stored in their homes – they are not comfortable with either brick and mortar banks or digital technology. Their current behaviour is programmed towards transacting with cash and borrowing from informal channels, such as their peers or loan sharks. Programmes such as Ehsaas have accelerated both familiarity and comfort with technology, but meaningful behaviour change is necessary to bring about major shifts in financial habits. A good way to do so is to prototype or test approaches in small packets, while course correcting the whole equation from the communication to the education to the experience, before scaling up.

2 Commit to Clarity; Eliminate Confusion. For people who lack an understanding of the fundamentals of money management, banking, saving and investing can be intimidating. Therefore, education becomes necessary and this in my view is the responsibility of the financial institutions.

3 Easy First Steps and a Path to Scale Up. The first step is always the hardest and behavioural science teaches us to make it as simple as possible. Usage will drive familiarity and comfort, which will then drive habit. Making the first step as easy as possible will help overcome discomfort and intimidation. The scale-up path is a path financial institutions can use to grow their business. People can start with basic banking products, and then graduate to credit facilities and other more sophisticated financial products.

4 Don’t Compromise the Service. Although financial services for the excluded may be an economic version of privilege banking for the elites, do not make it third class banking. Excluded audiences want good service and a good experience too. This holds for both brick-and-mortar and technology-based solutions.

Afzal Hussain is Chief Strategy Officer/General Manager, M&C Saatchi, Pakistan. afzal.hussain@mcsaatchi.com