While, addressing as key note speaker on "Monetary Policy and Digitisation of Payment Systems" Jameel Ahmed Deputy Governor State Bank of Pakistan (SBP) at the 21st MAP Convention on Wednesday said that the enhanced financial inclusion ensures economic efficiency, maximum participation of its population in the overall economic process and thus maximising growth and development. Technology on the other hand is rapidly enabling the policy makers to take effective action and leapfrog economies into new progressive eras, he added.
SBP is not only aware of the importance of these trends but is also continuously adapting itself in all areas of policymaking including monetary policy, financial inclusion and adoption of new technologies.
Jameel Ahmed said that uncertainty prevalent in the global economy mostly due to trade disputes among major economies and these trade wars are unsettling the capital and commodities markets and affecting the export performance of emerging markets.
To effectively tackle domestic structural bottlenecks and enhance our economy's resilience in line with the evolving global dynamics, Pakistan has made some tough but necessary adjustments in the monetary and exchange rate policies. These measures have already helped contain domestic demand pressures and led to a progressive improvement in the country's external account, he added.
He mentioned that supported by a healthy growth in workers' remittances and external financing from multilateral and bilateral sources, the country's foreign exchange reserves have now stabilised.
Encouragingly, the current account deficit decreased by a substantial 32 percent during FY19 and 73 percent in July 2019. However, inflation has been on an upward trajectory mainly due to the pass-through of the exchange rate depreciation and adjustment in energy prices.
Deputy Governor SBP said that the effectiveness of monetary policy critically depends on the level of financial sector development, including financial access. Therefore, Pakistan is committed towards broadening access to financial services and implementing development finance reforms and policies that can empower individuals and firms to access a well-functioning financial system, which cultivates opportunities for enhanced socio-economic outcomes, improved livelihoods and protection against economic shocks.
SBP in 2015 launched the first NIFS and sets the vision and outlines an action plan for achieving certain targets like ensuring that at least 50 percent of adults have a bank account in Pakistan by 2020.
The NFIS has progressed well, and as of June 2018 unique account ownership in Pakistan has reached to 63.9 million, representing more than 50 percent of adults having a bank account in the country well before the deadline of Year 2020, he informed.
Since headline targets achieved well before deadline of 2020, the Government adopted an enhanced NFIS, which sets the vision to improve financial inclusion through further access to finance & deposit base, promotion of small & medium enterprises, easy & affordable access to finance to farmers, facilitation in low cost housing finance and provision of Shariah compliant banking solutions.
Accordingly, the government has set the multiple targets to be achieved by 2023. This includes, enhancing the usage of Digital Payments to 65 million active digital transaction accounts, with gender segregation of 20 million accounts by Women and enhancement of Deposit to GDP ratio to 55 percent by 2023.
In addition, promotion of SME Finance by extending finance to 700,000 SMEs which is 17 percent of the private sector credit and increase in Agricultural Finance by serve 6 million farmers through digitalised solutions and extending annual disbursements to Rs1.8 trillion by 2023.
To promote the Islamic banking, it has set a target that by end of 2023 the Islamic Banking industry assets and its number of branches should be 25 percent and 30 percent of the banking industry.
He hoped that the NFIS action plan expects to contribute in achieving sustainable development through creation of 3 million new jobs, generate additional exports of $5 billion and enhance banks' deposits to GDP ratio to 55 percent by 2023 through measures adopted under NFIS-2023.
"NFIS strategy also includes digitisation of payment systems and adoption of technology as an effective method to improve financial access and inclusion," he added.
Deputy Governor SBP said that throughout history, technological innovations and advancements in payment methods have continually reshaped monetary systems. These technologies are now threatening to disrupt the financial sector by creating new forms of money and removing the need to intermediate, which has traditionally been the forte of banks.
However, SBP has adopted a comprehensive strategy of digitising payments in the country and now with the emergence of new enabling technologies, the retail payment systems are being transformed into the so-called "faster payments" that enables the public to pay and receive money in almost real time.
In addition, SBP has also started work on the implementation of a Micro Payment Gateway in partnership with Bill & Melinda Gates Foundation and its representatives in Pakistan. This Gateway will offer faster retail payments with advanced Application Programming Interfaces and directory services, which will simplify the requesting, receiving and sending of payments in the country.
Jameel Ahmed said that for ensuring trust and security of digital payments, SBP being cognisant of the risks inherent in digital payment is strengthening the oversight frameworks and capability. "Enhancing cyber resilience is our number one priority and our recent regulatory instructions and enforcements are just first steps in that direction," he added.