South Asia ranks 7th in the world in terms of gender parity with a score of 63.7%, as reported by the Global Gender Gap Report 2024. 1 It trails all other regions in terms of financial inclusion, economic participation, and opportunity. In Global Gender Gap Index 2024, Pakistan is in the bottom 10 countries and ranks 145th out of 146 economics reported in the index. This article will focus on financial inclusion in Pakistan and the policies implemented by State Bank of Pakistan to reduce the economic disparity.
Pakistan’s score and ranking in the said index have dropped by -0.005 and -3 respectively. Neighboring countries of Pakistan fare slightly better but still in challenging positions: Iran (143), Sri Lanka (122), Nepal (117), and India (129). Bangladesh, despite being ranked 99, continues to struggle in key areas of economic parity.
Read more: How digital supply chain finance is driving economic growth in Pakistan
Economic Disparity in South Asian Countries
In terms of economic empowerment and opportunities, Pakistan stands at 143rd country (36%). This rank is better than Bangladesh (31.1%), Sudan (33.7%), and Iran (34.3%) which means that Pakistani women have better economic opportunities than those of these countries. However, countries like India (39.8%) and Morocco (40.6%) maintain higher levels of economic parity for women.
While the progress remains slow, these rankings highlight the critical gaps and areas for targeted improvement across the South Asian region.
The women working in the formal and informal sector face various challenges. In the informal sector, like in the agriculture and daily wages jobs, women face health issues, poor working conditions, and less pay compared to men. In the formal sector, women face limited growth and promotion opportunities. This creates barriers to long-term success.
Financial Inclusion Challenges
In addition to the issues of access to the job market and having competitive salaries, the share of women in terms of access to financial services is also less than that of male counterparts. Financial inclusion means that financial services and opportunities like savings, investments, and payment options for men and women are equally provided. Financial inclusion has also been considered an important component to achieve UN Sustainable Development Goals (SDGs). However, there is a gap in access to financial services for women who are under-served, on a proportional basis, by the financial system.
Gender Gap in Bank Account Ownership
As of September 2024, there were around 76.9 million male bank accounts compared to just 28.7 million female bank accounts, just 37% of the male accounts. This gap increases more when comparing balances. The percentage of women account holdings to that in male accounts is around 22% only. Bridging this gap is a necessary step towards economic growth. 2
Female Population Vs. Bank Account Ownership
Despite the fact that the females constitute around 49.6% of the total population of Pakistan i.e. around 120 million female members of the population, only 28.7 million have the bank accounts. 3 This shows a great imbalance between the female population size and their participation in the financial system.
Reasons of Imbalance in Bank Account Ownership
One of the reasons for less bank accounts opened by females is the lack of awareness about using financial products. In addition, cultural traditions also play a key role in preventing women from low-income households from opening and maintaining bank accounts themselves.
Even if the accounts are opened, women are not allowed to operate their accounts independently and most of the time financial decisions are taken as per advice of spouse or other male members of the family. 4
Limited Loan Access for Women
Just like Pakistan faces a financial gap in women opening and managing the bank accounts, a similar picture is seen on the lending side. According to the IMF data, Pakistan lags behind neighboring countries Bangladesh and India in loan account ownership. In 2023, out of each 1,000 female adults in Pakistan, only 34 have loan accounts which is the lowest if compared to Bangladesh and India.
Closing this gap is crucial for women’s financial independence and driving inclusive growth in the country.
Major Policies to Overcome Financial Inclusion in Pakistan
To address the issue of financial inclusion in Pakistan has implemented targeted policies designed to improve the gender gap.
Related: Why Pakistan’s largest economic sector gets the smallest share of banking finance?
Banking on Equality Policy
Keeping in view the level of financial inclusion in Pakistan, State Bank of Pakistan has developed and rolled out a policy named Banking on Equality to increase financial inclusion because it is perceived that the gender-neutral policy has not been successful to eliminate or reduce the gender gap.
Under the said policy, a dedicated department has been established at banks to develop and offer women-centric financial products. Such steps have been taken to ensure inclusive and sustainable economic growth.
National Financial Inclusion Strategy
Since 2015, a strategy has been developed on the national level to increase the financial inclusion in Pakistan by setting targets for specific areas. So far, three sets of National Financial Inclusion Strategies (NFIs) have been rolled out: 2015-2018, 2019-2023 and 2024-2028. Under these strategies, the gender gap has reduced from 47% in 2018 to 34% in 2023. 5
The current strategy for 2024-2028 has set the priority to increase the usage and availability of digital financial services. It also targets to grow the financing for certain sectors including agriculture, SME, sustainable finance and microfinance. The said strategy aims to increase the financial inclusion to 75% and reduce the gender gap to 25% by 2028.
Tackling Financial Inclusion Through Digital Banking
In order to increase the availability of digital financial services for women, the mobile gender gap also needs to be narrowed so that more and more women can access the financial services through their internet and mobile banking. As per the global GSMA mobile gender report 2024, women are 8% less likely to own a mobile phone compared to men. The largest mobile gender gap in terms of mobile ownership has been reported for the South Asia region. For Pakistan, this gap is 38% and only 26% of women in Pakistan own a smartphone compared to 52% men having the smartphone device. 6
Credit Guarantee Scheme for Women Entrepreneurs
SBP has introduced a scheme to increase the access to financial services for women entrepreneurs across the country. The scheme is titled as Refinance & Credit Guarantee Scheme for Women Entrepreneurs (IRCGS-WE) and provides funds for women at subsidized rate of 5% per annum. 7 Salient features of the scheme are as follows:
- Maximum financing limit is 5 million rupees.
- Only women owned SMEs are eligible for the scheme
- Maximum tenor of the facility is 5 years with 6- months grace period
- Risk converge up to 60% is available
- The facility can be availed through Shariah compliant modes.
Conclusion
Closing the gender gap in financial inclusion is necessary for achieving sustainable economic growth in Pakistan. Policies such as Banking on Equality and the National Financial Inclusion Strategy are taking important steps by targeting women-centric financial products and offering credit schemes to women entrepreneurs.
With ongoing efforts, such as subsidized financing and digital outreach, Pakistan has the potential to achieve its targets of 75% financial inclusion and a reduced gender gap by 2028.
Sources
- https://www3.weforum.org/docs/WEF_GGGR_2024.pdf ↩︎
- https://www.sbp.org.pk/publications/Quarterly/2024/Sep/12.%20Statistics%20on%20Schedul
ed%20Banks,%20Microfinance%20Banks%20and%20Development%20Finance%20Institutions%20in%20Pakistan%20-%20Sep%2024%20.pdf ↩︎ - https://datareportal.com/reports/digital-2024-pakistan#:~:text=Population%20of%20Pakistan%20in%202024,of%20the%20population%20is%20male. ↩︎
- https://www.sbp.org.pk/acd/2021/C1-Annex-C.pdf ↩︎
- https://www.sbp.org.pk/NFIS/NFIS2024-28.pdf ↩︎
- https://cdpr.org.pk/addressing-the-gender-digital-divide-in-pakistan-promoting-equal-access-to-mobile-phones-for-economic-empowerment/ ↩︎
- https://www.sbp.org.pk/Incen-others/sme-6.asp ↩︎