Pakistan’s branchless banking (BB) industry has been bustling with activity, thanks to aggressive efforts by the regulator.

In fact, our policies and performance have often been cited as a model case. But instead of the usual self-congratulations that the stakeholders partake in, let’s see how well we have been doing on this front.

The State Bank of Pakistan’s (SBP) latest quarterly data contains some interesting trends to unpack. On the surface, it appears that the country saw improvement in pretty much all the main numbers — be it the agent network, branchless banking accounts or volume of transactions.

In July-September, Rs1.92 trillion was transacted through BB with the volume coming in at 461.96 million, representing quarterly growth of 27.59 per cent and 16.45pc, respectively. The overall agent network also grew by 16,772 while the number of active agents rose by 8,846.

Figures for mobile wallet transactions also include those done via the agent even if the customer actually did everything in cash

Similarly, total BB accounts clocked in at 58.14m during the quarter, up from 26.69m in the preceding three-month period. More importantly, it’s the number of active accounts that jumped by 16.7pc to 31.16m, exhibiting an increase of 4.47m. This was accompanied by an increase in the proportion of active accounts to 53.6pc from 50.83pc. Microfinance banks (MFBs) define activity as having done at least one transaction every two months.

But let’s exercise some caution before we cheer the numbers because there’s a slight catch.

A source well versed in industry dynamics explained that figures for mobile wallet (MW) transactions also include those done via the agent — in fact disproportionately so — even if the customer actually did everything in cash. Think of it this way: you go to the nearest kiryana store to make a payment and hand in cash to the shop owner who then does the transaction online. While this gets reflected under the MW transfer in data, it was still over-the-counter from the customer’s viewpoint.

MW-to-MW transfers soared 35pc in value to Rs320.24 billion across 92.25m transactions in July-September, up from Rs237.11bn and 68.52m in the previous quarter. Year-on-year growth was even more stellar at 108pc and 105pc in terms of value and volume, respectively.

The latest quarter also noted an addition of almost 1.5m female BB users compared with 4.12m male. However, the share of female BB users hasn’t witnessed any impressive strides, edging up to 23.05pc during the period under review from 22.03pc in April-June 2019. This problem is hardly unique to branchless banking and is representative of how women in this country are locked out of financial services, sometimes by family or through requirements that limit their agency like requiring husband or father’s documentation.

At the risk of repeating what everyone has been saying (in newspapers and at conferences at least), any dream of financial inclusion will remain exactly that — a dream — unless aggressive and concerted efforts are made to bring half of the population into the formal system.

Moving on, the share of transactions by each province has virtually remained static with Punjab unsurprisingly accounting for 60.1pc of the total in

July-September, followed by Sindh (20.2pc) and Khyber Pakhtunkhwa (15pc). No province saw a change of more than 20 basis points in its share over the last quarter.

While full of headline numbers, the document doesn’t reveal anything regarding the performance of major MFBs. Unfortunately, we have gone in the opposite direction as far as the depth of data is concerned. The SBP replaced quarterly branchless banking newsletters with just statistics sheets a few years back. The former used to contain information about the agent network of each player as well as their respective shares in terms of deposits and active wallets.

As per the last such document from October-December 2018, Telenor Microfinance Bank (the backend of Easypaisa) had the biggest network with 130,020 agents while laying claim to 52.4pc of the total number of accounts. But in terms of the share of active accounts and total deposits, Mobilink MFB was the leader at 44.6pc and 55.2pc, respectively.

A reversal to the olden ways with the same level of depth, if not more, will be a welcome move. It will go a long way towards ensuring more transparency in the industry.

Published in Dawn, The Business and Finance Weekly, December 14th, 2020