By Abdul Wajid Khan

ISLAMABAD, July 04 (INP-WealthPK) Digitalization of private sector wage payments can bring around 20 million adults into the formal financial system, as currently there are 114 million adults in Pakistan have no bank account, reports WealthPK.

According to the latest Global Findex 2021 database released by the World Bank, the Covid-19 pandemic has spurred financial inclusion – driving a large increase in digital payments amid the global expansion of formal financial services. This expansion has created new economic opportunities, narrowing the gender gap in account ownership, and building resilience at the household level to better manage financial shocks.

As of 2021, 76% of adults globally now have an account at a bank, other financial institution, or with a mobile money provider, up from 68% in 2017 and 51% in 2011, while in Pakistan, as of 2021, 21% of adults have a bank account and 13% of women have account ownership in bank or any other financial institutions.

The 76 percent global account ownership rate in 2021 represents a 50 percent increase from the worldwide average of 51 percent reported in 2011. But the rate of Pakistan grew by just 10 percentage points over the past decade, from 10 percent in 2011 to 21 percent in 2021.

The report highlighted that globally, about 1.4 billion adults are still unbanked — that is, they do not have an account at a financial institution or through a mobile money provider. However, this number has declined from 2.5 billion in 2011 and 1.7 billion in 2017. Pakistan with 114 million unbanked adults and Indonesia with 98 million are amongst the largest populations of unbanked.

Global Findex 2021 survey data reveals that businesses and government, could also boost account ownership by paying their unbanked employees through accounts rather than in cash. Globally, 12 percent of unbanked adults — about 165 million people — received private sector wage payments in cash, including about 50 million women and about 70 million adults with incomes in the poorest 40 percent of households in their economy.

Digitalizing private sector wage payments could reduce the share of unbanked adults by up to 36 percent in Myanmar and by up to about 20 percent in Cambodia, the Arab Republic of Egypt, Indonesia, and Pakistan, among other economies. In Pakistan, such digitalization would result in a 13-percentage point increase in account ownership and would bring around 20 million unbanked adults into the formal financial system.

Mobile phones could help facilitate electronic wage payments because more than 80 percent of adults who receive private sector wages in cash in Cambodia, Egypt, and Pakistan, and about two-thirds in Indonesia, have a mobile phone.

According to the report, in South Asia, 242 million unbanked adults have a mobile phone — that is more than half of the 432 million unbanked in the region. More specifically, 56 percent of all unbanked adults in the region have a mobile phone, including 51 percent of unbanked adults in India and 55 percent of unbanked adults in Pakistan.

The report said efforts to narrow the gender gap have paid off since 2017. Pakistan saw its gender gap narrow from 28 percentage points to 15 percentage points, despite a flat overall account ownership. The gender gap persists in mobile phone access in South Asia. In South Asia, for example, women are 22 percentage points less likely than men to have a mobile phone. In Pakistan, women are half as likely as men to have a mobile phone.

It said that at global level, 77 percent of adults active in the labor force have an account, whereas only 65 percent of those out of the labor force have an account, leaving a gap of 12 percentage points. In Nigeria and Pakistan, adults active in the labor force are roughly twice as likely to have an account as those who are not.

Some developing economies have a gender gap in the use of digital payments. In Pakistan, for example, men and women account owners are equally likely to use their account for digital payments and most do (84 percent), despite low overall account ownership and an ownership gender gap of 15 percentage points. In developing economies, more than a third of adults paying utility bills from an account did so for the first time after the start of the Covid-19 pandemic. 

Across developing economies, utility bill payment practices vary widely. In Egypt, for example, virtually everyone who made utility payments did so in cash, as did more than 80 percent of those paying utility bills in Indonesia, Morocco, Myanmar, and Pakistan, among others.

The report said that globally, 30 percent of unbanked adults said they do not have an account because a family member already has one. The data reveal significant gender gaps in Algeria, Bolivia, Nepal, Pakistan, and Tunisia, where women are more likely than men to report this reason.

Unbanked adults express insecurity about managing an account on their own. In Pakistan, for example, more than four out of five unbanked adults said they could not use an account at a financial institution without help.

Credit :
Independent News Pakistan-INP