Improve your savings rate with the help of digital tools. Why? Because more economic potential may be generated via banking system digitization.

Deficit in savings

The investment needs of the Pakistani economy cannot be met because of a lack of savings from the country's households, businesses, and government. As a consequence, "foreign inflows" via remittances, the issuing of sovereign bonds/loans, and flows under Foreign Direct Investment are essential to the economies of these countries (FDI). A sizable sum of money was disregarded since its owners didn't utilise conventional banking services or save in conventional ways. Increasing domestic savings in Pakistan is necessary to lessen the economy's dependence on foreign inflows, which are volatile and vulnerable to external shocks. This calls for targeted policy initiatives to be implemented. If digital financial services were made more accessible to the general public, with an emphasis on the women's segment and rural regions, it would bring a substantial amount of money into the formal economy, reducing the need for dependence on foreign inflows.

Read More: Is Saving Account the Best option?

Financing in Small Medium Enterprises

Recent data shows that Pakistan's savings rate is 6.1% of GDP, whereas the investment rate was 16.4% of GDP in FY18. The current account deficit, a measure of the difference between saving and investing, topped 5% of GDP in FY18 due to this trend and is financed mostly by international trade.

Pakistan has a low savings rate compared to other countries in the area for a number of reasons. On the supply side, just approximately 25% of adults have access to traditional banking's official financial services. There were 53 million accounts with Rs12.6trillion in deposits as of June 2018. About one-third of that amount was kept in checking accounts, and slightly under half of all deposits were made by people.

Read More: Best Financial Services in Pakistan

One third of the country's GDP is held in the banking sector. There has been a decrease from the industry average of 59% to this. When compared to GDP, bank deposits in Iran were at 80%, deposits in India were at 66%, deposits in Bangladesh and Sri Lanka were at 45% and 44%, respectively.

Loan For Small Business

National Savings Schemes (NSS) is one of the official savings options available; as of June 2018, NSS mobilisation was at Rs 203 billion. That's almost equivalent to the total amount of micro-deposits now in circulation in the microfinance industry. More than 30 microfinance organisations make to the expanding Microfinance industry (microfinance banks and microfinance institutions). Nearly 35 million people have saved a total of Rs240 billion with these institutions as of September 2018. The rural savings market in Pakistan is a big opportunity for Pakistan Post.

When it comes to demand, consider that around 79% of all people do not have a bank account and instead choose to save using cash or other unofficial means. There are a number of factors at play beyond a lack of physical locations that contribute to the low uptake of conventional banking and savings products. Only 33% of Pakistani adults said they had saved any money in the previous year, according to a World Bank poll from 2017. To put it simply, it seems that people are more inclined to put money down for future consumption (mostly for durable items) than for long-term investment (such as higher education). According to the World Bank's Findex Survey, just 9% of Pakistanis save for retirement, and only 15% save to establish, maintain, or grow a farm or company (2017). Close to half of those polled did not have accounts due to "insufficient finances," according to the same study.

In the realm of finance, technology has enabled a number of innovative

Nearly a decade has passed since digital transaction accounts (DTAs) were first introduced in Pakistan. The growth of Branchless Banking (BB) in the 2010s may be traced back to a succession of policy documents, beginning with the Financial Inclusion Program and continuing through the National Financial Inclusion Strategy (2015) and the improved NFIS (2018). There were 10 BB service providers as of June 2018; these businesses served a combined total of almost 40 million mobile money accounts via a network of over 400 thousand agent locations.

It was not possible to obtain the same degree of success while soliciting modest deposits. Despite the explosive rise of mobile payment systems, DTAs' ability to attract deposits has remained flat over the last several years at about Rs15 billion. Although BB agents make up a significant portion of the total value of deposits, most of the money in this pool is really being managed by the agents themselves. The amount is negligible anyway, particularly when compared to the over one trillion rupees worth of transactions processed by the BB system between April and June of this year.

Small Business Trade Financing

Nearly half of the m-wallets/BB accounts established to this point are in "inactive" status, demonstrating the service providers' inability to maintain customers' interest. The SBP uses a loose definition of "active accounts," which means that the account was either created during the past 180 days or was utilised at least once within the last 180 days.

It is evident that service providers need to provide improved saving products to channel micro deposits and to maintain the current positive trend of increased use of m-wallets relative to OTC transactions in order to reduce account inactivity. In addition, we must change our attention from the "number of accounts opened" to the "use of accounts." That's why it's important for service providers to reward actual account use, rather than merely encouraging new consumers to sign up for m-wallets via commissions and other enticements for their sales teams.

Foreign experience helps them break into the industry.

In other developing nations, forward-thinking mobile money carriers have successfully enticed clients to switch to their platform by providing easy access to savings accounts.

Their findings imply that appealing "savings" programmes may serve as a "foot in the door" for the under-banked and unbanked to join the mobile money ecosystem. In Kenya, for instance, Safaricom's M-Pesa platform has seen great success with the M-Shwari deposit accounts. Possibly, BB companies in Pakistan might follow suit by I not charging any fees for moving funds between other operators' wallets, ii) offering a guaranteed minimum saving rate on traditional savings accounts, and iii) developing Digital ROSCAs for the tech-savvy market.

What we Learn

There is also space for the digitalization of public savings systems. SME Bank is digitising the banking systems and data of Central Directorate of National Savings (CDNS) and providing other delivery channels to increase CDNS's ability to provide financial services to low-income and excluded populations. A third of the 376 National Saving Centers have been digitised, a mobile app called Qoumi Bachat Digital has been released to help users keep track of their savings, and a digital complaint resolution mechanism has been implemented to help customers get answers to their concerns as quickly as possible. In addition, SME Bank has lent technical support to Pakistan Post in order to digitise its money order service. This would allow the postal service to provide a wider variety of products, reach more people, and make its services more accessible to its patrons. Furthermore, the present government's National Financial Inclusion Strategy aims to mobilise digital savings by mandating the widespread digitization of governmental transfers including wages, pensions, welfare payments, etc (NFIS). SME Bank Pakistan is collaborating with influential government actors to modernise these payments via the use of blockchain technology. For more informative blogs like that visit: SME Bank