SBP Media Training Workshops

1. Covering Financial Inclusion Naween A. Mangi SBP Media Training Workshops

2. Financial Inclusion: World Bank • Individuals and businesses have access to useful and affordable financial products and services that meet their needs; transactions, payments, savings, credit, insurance—delivered in a responsible and sustainable way • Financial inclusion is a key enabler to reducing poverty and boosting prosperity • FI is building block for opportunities for economic growth with access to digital financial services critical for joining the new digital economy

3. World Bank's 2020 Initiative • Financial access helps families and businesses plan long-term goals and emergencies. • As account holders people are more likely to use other financial services such as credit and insurance, expand businesses, manage risk, invest in education, improve quality of life • Universal Financial Access Goal: By 2020 adults who aren't part of the financial system are able to have access to an account to store money and send/receive money.

4. World Bank's 2020 Initiative • UFA2020 focuses on 25 priority countries where 70% of financially excluded people live (Pakistan included) • WB Approach centers on: • Creating regulatory environment to enable access to transaction accounts • Expanding access points • Improving financial capability • Driving scale and viability through govt programs such as social transfers into those accounts • Focusing on reaching disadvantaged: women and rural • Encouraging use of financial services, to move from access to finance to account use • Digitize payments

5. Financial Inclusion: Global Data • Since 2011, 1.2 billion people have opened an account • Globally 1.7 billion people or 31% of adults still don't have a basic account • Two-thirds of adults without the account cite lack of money as reason: this means financial services don't serve low-income users • Other barriers: distance from provider, lack of documentation needed, lack of trust in providers: WB

6. National Financial Inclusion Strategies • In 2014, 50 countries made major financial inclusion commitments: World Bank • World Bank working with 30 countries that have pledged commitments toward achieving Universal Financial Access • World Bank plans help in three areas: • Support • Design • Implementation

7. Pakistan Indicators: Path to Stories • Adults w/transaction account: 13% Vs 44% India • # of unbanked adults: 107 million (of 123.5 million) • Made/received digital payments: 9.5% • Received wages or govt transfers in account: 3% • SMEs with outstanding line of credit: 5% • Women above 15 who have saved at a financial institution: 1.5% • Women above 15 who have borrowed from financial institution in last year: 0.3% • # of transaction accounts per 1000 adults: 451.2 • # of ATMs per 100,000 adults: 7.8

8. Pakistan 2020 Targets • % of adults with transaction account: 50% • % of women with transaction account: 25% from 2.9% • Priorities: • Transaction accounts • Agricultural loans • Insurance • Pensions • Housing finance • Digital services

9. Pakistan Opportunities: WB • 9.2 million adults: by implementing NFIS • 3.4 million adults: by digitizing govt to person cash transfers • 69.3 million adults: by opening up the market and legal/regulatory environment • Informal economy: 75% to 91% of formal economy. Informal economy contributes to financial exclusion since banks don't want to do business with informal sector. • To slide and dice the data to find stories: datatopics.worldbank.org/g20fidata/

10. Best Stories: Financial Exclusion • Media covers financial inclusion initiatives: largely limited to SBP releases about branchless banking initiatives etc. • Audience won't understand financial inclusion till it understands financial exclusion • Audience won't understand financial exclusion till it understands poverty • Back to basics: Real stories about poverty, making ends meet, savings and borrowings

11. Stories of Financial Exclusion • Savings Committees: No regulatory recourse, no written agreements, no incremental income but still effective and widely used • Village-wise, women's groups, shop-keeper groups, office groups, neighborhood groups • Loan Sharks: Astronomical interest rates, no regulatory recourse, no written agreements, debt traps • Pay monthly interest, principal stands

12. Reporting on Financial Exclusion • Collect anecdotes: Real people, real stories • Go to the scene: background, economy, description, details • Collect the data: Relevant statistics about bank accounts, savings, credit • Assess the scale: How big a problem is this elsewhere/country as a whole • News you can use: Address the opportunity • Make the comparisons: Regional, global, within population groups • Address the solution: What is happening through NFIS to solve this problem

13. Rural Finances: The Unbanked • Reasons for Loans • Illness • Weddings • Gambling addiction • Previous debts to pay • Fights that requires penalties/police bribes • Travel costs for overseas labour • Farming input costs

14. Rural Finances: The Unbanked • Reasons for Saving • Weddings • Paying debts • House repair • Buying a fridge or TV/household improvement • Starting a small business • Buying gold as an investment • Buying livestock as an income generator/asset

15. Loan Sharks: The Fertilizer Scam

16. Loan Sharks: The Urea Scam • Dilber Shar, donkey cart transporter & farmer • Location: Village Usman Unnar Shar • Family Size: 14 • Reason for needing loan: Child's sickness • He bought 8 bags of DAP urea (50kg each) from a rice mill owner on credit with a promise to pay in three months. • The seller sold each bag for Rs 5000 each; if he bought on cash it would have cost Rs 3500 • Dilber went and sold these to a Urea trader for Rs 3000 each; trader made a profit of Rs 500 per bag • Dilber got cash Rs 24000 and will pay back Rs 40,000 in 3 months • Advantage: Instant solution • Will pay back when rice crop harvests • If he can't then he will repeat the cycle

17. Loan Shark: The Livestock Case

18. Loan Sharks: The Livestock Case • Someone needs funds for a family wedding • He buys a goat on credit from a livestock trader. It costs him 22,000 rupees • He promises to pay after 6 months • Current price of goat is Rs 9000 • The borrower sells the goat for Rs 9000 and receives instant cash • Immediate problem solved • Will worry about repayment later

19. Loan Sharks: The Moneylender • Someone needs Rs 10,000 for an urgent problem at home • They approach a local moneylender • The moneylender is a shopkeeper • The shopkeeper needs to be paid back Rs 14,000 at the end of one month • Interest payments are Rs 4000 per month • The principal remains outstanding till its repaid

20. Loan Sharks: Gambling Loans • A gambler is in the middle of a big game • During a gambling session, he needs money to keep the game going • Another gambler is standing right there with ready cash • The borrower takes Rs 5000; he has to pay the principal along with interest amounting to Rs 500 per day • The gambler loses the game and can't repay; he accumulates a debt of Rs 15000 in interest payments in a month plus the principal amount of Rs 5000.

21. Loan Sharks: Gold-Backed Loan

22. Loan Sharks: Gold-backed Loan • Hakimzadi, a farmer, went to a lender whose income is based on these loans • She asked her for a loan of Rs 10,000 to buy fodder for her buffalo • She deposited her wedding gold chain worth Rs 18000 as collateral • Terms: She will return the money in 2 months when her crop harvests and will repay Rs 13,000. If she can't repay, she loses the chain

23. Loan Sharks: Farm as Collateral

24. Loan Sharks: Farm as Collateral • Ghulam Hyder & his son Zubair own 4 acres of farmland on which they produce wheat and rice • He had saved through committees and sold buffalo money to build a family home • When he ran out of funds, he gave 1 acre of his land to a loan shark • One acre is currently worth Rs 1 million • The loan shark gave him Rs 200,000 in cash • A loan agreement was signed for 2 years • The loan shark will farm the land and keep the proceeds for two years; a profit of Rs 200,000 • After two years, if Hyder can return Rs 200,000 he gets the land back

25. Informal Savings • Savings committees: Wide prevalence in rural and urban settings, all financial levels • Livestock; goats, sheep, buffalo, cow, camel • Gold jewelry • Storing crop waste for fodder value • Storing crop to sell during off-season • Cash at home • Dowries in advance

26. Stories on Financial Inclusion • Now that you've understood what happens when people are financially excluded and you have also explained these to your readers and to opportunity seekers like banks and technology companies, you are better placed to write about inclusion • When banks tell you about their inclusion efforts, follow the money and tell a real story about how people benefited, what problems they face: Help make the system better

27. Now....Test Your Skills • Break into groups • Develop a story idea on the topic of financial inclusion/exclusion • Make sure you have a headline • Make sure you have a nut graph/theme • Make sure you have a reporting plan especially for where you will get anecdotes • What's the scale of the problem? • How does this compare regionally/globally? • Which expert voices will you use? • What data will you use? • Can you assess solutions on offer?

28. Thank you!