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Branchless Banking: Pakistan vs Bangladesh

Branchless Banking: Pakistan vs Bangladesh


LAHORE: Pakistan’s market is hailed as an innovation laboratory for branchless banking (BB) services within the South Asia region as well as outside. But it seems that Pakistan’s regional leadership could soon be taken over by a relatively late entrant in the sector: Bangladesh.

Keeping in mind that Pakistan and Bangladesh have similar populations, mobile penetration and income levels, Greg Chen – who is the Regional Representative for South Asia at the World Banks financial inclusion policy center of Consultative Group to Assist the Poor (CGAP) – recently compared the BB sectors in the two countries and published his findings online.

Chen found out that Bangladesh has made more progress in last two years than Pakistan has in the last four years. He compared the latest central bank data from the two countries, which shows Bangladesh in the lead on various counts (see the illustration). The latest quarterly data available shows that the BB transactions value grew by 57 percent in Bangladesh compared to seven percent in Pakistan.

The two BB markets are similar in some respects, according to Chen. Big players have invested heavily: BRAC Bank and Dutch-Bangla Bank are prominent in Bangladesh, while both leading telcos and banks are invested in Pakistan. Moreover, agents non-exclusivity (handling multiple service providers) and rising trend of over-the-counter transactions have resulted in large volumetric growth in the two markets.

Chen has pointed out onerous account opening requirements that are retarding BB service uptake in Pakistan: “Even the lowest-KYC accounts (level 0 and level 1) are less than half in number of what Bangladesh has reached in a shorter time span. Bangladeshs visually confirmed voter identification card and paper account opening process facilitate faster account growth. Pakistan is also limited in the number of agents who can open accounts (only 27 percent) – no such limits in Bangladesh,” he wrote.

However, the reason why Bangladesh seems to have expanded its BB infrastructure faster could be that it is two commercial banks which dominate the market there, relying on their conventional banking footprints. In Pakistan, it is telcos that are more active – but due to their inherent bias towards mobile wallets and mobile-based transactions, infrastructure expansion may remain secondary to growth plans.

The CGAP comparison shows Pakistan lagging behind. However, the fact that Pakistan’s BB market is more competitive and diverse than Bangladesh’s, that it has full blessings of the government and sector regulators, and that it is moving towards interoperable networks, make it a different market than Bangladesh’s. Chen also points out this qualitative difference in the two markets dynamics.

So, the Pakistani policymakers may want to look into the Bangladesh’s BB market for possible policy emulation, but need not worry too much!