Bringing finance to Pakistan's poor : a study on access to finance for the underserved and small enterprises

Abstract

Access to financing is now widely acknowledged as a path to meaningful economic inclusion and reduction in poverty. Policy efforts to increase access to finance in Pakistan have taken time to bear fruit, but now access is indeed expanding quickly in certain financial sectors (microfinance, remittances), albeit from a very low base. Nevertheless, policy measures cannot single-handedly increase financial access; financial institution willingness to expand access in Pakistan has been stinted by slow technologic advances, weak legal foundations, and unsuitable financial processes and products. Poor socioeconomic conditions, gender bias, and low levels of basic education and financial literacy remain barriers, but perhaps the single strongest driver of low demand for financial access has been income. Major constraints to financial access, in spite of policy reforms, arise from the high levels of poverty, combined with low awareness of and information about available financial services, as well as gender bias. This report and the attendant pioneering nationwide access to finance survey, part of a considerable donor-supported State Bank of Pakistan (SBP) financial inclusion program, is meant to fill in the gap.