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  • Mar 30th, 2017
  • Comments Off on Cash withdrawal by BB agents: Finance Bill 2017 may incorporate amendment to IT Ordinance
Finance Bill 2017 may incorporate an amendment to the Income Tax Ordinance 2001 for adjustment of withholding tax on cash withdrawals by branchless banking (BB) agents. Sources told Business Recorder here on Wednesday that the issue of adjustment of withholding tax on cash withdrawals by branchless banking agents was discussed during the 4th meeting of National Financial Inclusion Strategy (NFIS) Steering Committee.

According to details, BB agents conduct banking transactions on behalf of their customers and such transactions are being settled on a daily basis which attracts withholding tax when withdrawals exceed Rs 50,000 limit. It was, therefore, recommended to the NFIS council that Federal Board of Revenue (FBR) may consider adjustment of withholding tax on cash withdrawals by BB agents to the extent of disbursements made to the clients.

A detailed proposal in this regard was developed in consultation with the industry and was shared with the FBR. Subsequently a meeting of concerned stakeholders ie banks, Finance Division and FBR was held wherein FBR principally agreed on the recommendation. The NFIS Council in its last meeting reviewed the said recommendation and advised that FBR may considerate subject to the conditions that agents shall maintain separate accounts for the BB transactions and such transactions would be verifiable and the aggregate withdrawal by per person per day will not exceed Rs 50,000. The chairman NFIS Council also advised that the proposed amendment in income Tax Ordinance for adjustment of withholding tax on BB agents would be adopted through Finance Bill 2017-18 at the time of budget. The text of amendment in this regard has been finalised and shared with Finance Division for further action.

Sources said that in order to address the challenges behind the low level of financial inclusion. Pakistan has developed a broader National Financial Inclusion Strategy (NFIS) in collaboration with the World Bank which was adopted by the GoP. The objective of the strategy is to set national vision for achieving universal financial inclusion in Pakistan. The NFIS lays out the vision, framework, action plan, and target outcomes for financial inclusion. Under the NFIS headline targets, the overall goal is to achieve universal financial access. However, other headline targets under NFIS, to be achieved by 2020, are 50 percent of the population will have a bank account; 25 percent of adult females will have a bank account and loans to SMEs will account for 15 percent of total bank loans to the private sector.

The NFIS main achievement is that it has mainstreamed financial inclusion as a national priority. This has been achieved through NFIS governance mechanism. The NFIS governance bodies have enabled advocacy ownership and support needed for NFIS implementation from various stakeholders.

The NFIS Council chaired by federal finance minister is the apex platform for advocating and securing ownership at the highest level for achieving Pakistan''s financial Inclusion objectives and vision. The NFIS Council has held 4 meetings and its fifth meeting is scheduled to be held on April 07, 2017.

The NFIS Steering Committee, chaired by SBP governor, has the overall responsibility of approving the action plans and monitoring the implementation of the Strategy. Seven technical committees (TCs) have been working in focus areas for preparing implementation plans and reviewing progress for achieving the NFIS objectives. Around 160 plus members have been taken onboard including ministries, government departments, regulators, associations & networks and providers. The technical committees have so far held 26 meetings and conducted focused and concrete deliberations to firm up action plans.

Key strategic actions approved by NFIS Council: The NFIS Council approved a number of strategic actions such as development of a national payment gateway (NPG), automation of the government collections and disbursements, introduction of a warehouse receipt financing (WHRF) system, integration of National Savings scheme (NSS) with national payments system; and initiation of new schemes of prize bonds.

Asaan (Easy) Mobile Account (AMA) Scheme: The NFIS Council in its last meeting held on January 11, 2017 approved an Asaan (easy) Mobile Account (AMA) scheme under which the digital finance service providers will join an integrated platform, allowing any person with a basic mobile phone to open a digital transaction account through a unified Unstructured Supplementary Service Data (USSD) code or String from anywhere at any time.

The objective of scheme is to improve accessibility of new customers for account opening drive usage digital financial services through increased number of account-to-account transactions across various networks and provide digital access to a range of quality financial services. This will facilitate the poor and marginalised section of the society towards adopting digital finance and also transform banks to shift their focus from Over the Counter (OTC) services to branchless banking (BB) account.

Opening of Asaan Accounts: To enhance the outreach of basic financial services to unbanked or underserved segments of the population and achieve the targets set out in NFIS, SBP introduced the Low Risk "Asaan Account" with simplified due diligence requirements. Minimum initial deposits (Rs 100) and monthly debit limit of Rs 500,000 and overall credit limit of Rs 500,000. The initiative resulted into addition of 1.79 million accounts in the banking system as of December 31, 2016.

Rationalisation of NADRA''s verification Cost: In order to facilitate mass enrollment of DTAs, it was recommended that NADRA may consider providing additional data fields required for necessary KYC requirements irrespective of their volume to all BB providers for opening of BB accounts, under the agreed discounted price structure, as per MOU signed by SBP and NADRA. After substantial concerted efforts by all the stakeholders, the NADRA has agreed to provide additional data fields required for necessary KYC requirements. In this respect, NADRA has updated the services as per the above agreement and advised the banks to test the updated services.

Women Financial Empowerment: The focus on improving financial inclusion for women is an increasing attention globally. Recent researches provide solid evidence when women, almost 50% of the world''s population, participate in finance system, there are significant benefits in items of economic growth with greater equality and social well being. Formal financial access for women has also grown in Pakistan as female users'' formal financial services have increased from 5 percent in 2008 to 17 percent in 2015. Similar the number of women with bank accounts jumped from 4 percent to 11 percent during the same period. However, there is still huge potential as 26 percent of women avail financial services informally and 57 percent of women are financially excluded.

The NFIS is cognisant of the fact and has set a target of women''s financial inclusion up to 25 percent by 2020. To this end, development of a program for women entrepreneurship is one of priority actions approved by NFIS Steering Committee. In this regard, a workshop on ''Women Financial Empowerment - Challenges & Opportunities'' would adopt an industry level approach and strategise/kickoff activities to promote women financial inclusion in Pakistan.



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