Laraib Nisar
Alexander Hamilton, the founding father of USA, once said, “Banks are the happiest engines that ever were invented for creating economic growth”.
We are all well aware that finance shapes the contours of the economic horizon, and for any economy to flourish, a proper handling of state’s finances is essential along with proper means to increase the finances and proper management of expenses. Like most developing countries, Pakistan’s frail economy is in a constant struggle to alleviate, but it faces complex hurdles. One of the many problems that hinder Pakistan’s economic wellbeing is the weaknesses in the Banking sector. Banks, being the supreme financial institutions, show a lot about the economic condition as well as the overall societal outlook of a country. But unfortunately, our banking system is maligned by some inherent flaws that keep people at a distance from formally opening bank accounts and access financial services.
The biggest and most prevalent problem with Pakistani banks is their discriminatory and biased treatment and policies for women. It is clear that Pakistan cannot develop its economy without the financial inclusion of women, so in order to promote female financial inclusion, the first step is to bring women in the formal banking network. In Pakistan, women need at least two formal documents i.e. a CNIC, and a marriage certificate/proof of employment. A huge number of women in rural areas and even in urban centers do not have national identity cards and marriage certificates due to cumbersome processes, social pressure and a lack of awareness. Moreover, with high trends of illiteracy in females, a lot of women aren’t economically active, and those working are mostly in the informal economic domain, so they do not have any substantial document to serve as an employment proof.
The few women that manage to open formal bank accounts for their financial transactions, face a great difficulty in obtaining credits. Females are asked for more collateral than males for acquiring loans (which they can’t provide due to documentation gaps), are sometimes charged higher interest rates than their male counterparts and are refused loans more frequently than men. The issue makes women refrain from taking on entrepreneurial ventures. Though the State Bank of Pakistan (SBP) offered the Refinance and Credit Guarantee Scheme for Women in 2017 at subsidized rates, still not a lot of women can access these loans because lending regulations and participating institution’s credit policies still apply to such loans.
Surprisingly, financially independent females aren’t accepted as legitimate guarantors, if their parents/spouse/other family members are applying for a loan in the bank. Additionally, females often feel ignored in banks. Their queries and questions aren’t usually answered and women clients are largely ignored due to preconceived views on their creditworthiness, their ‘dependency’ on men and difficulties in gaining information about their financial reliability. Low female staff is another issue which adds fuel to the fire. Culturally, females are more inclined towards interacting and working with female employees at the banks, but the number of female employees is usually low in the banking sector due to the prevalent stereotypes and stigmas.
In Pakistan, there is an overwhelming trend of saving money especially in females, but in most parts of the country, the saving is done through domestic committees, and women aren’t even aware of the fact that they can use saving accounts in banks to save efficiently. The root cause for this issue is lack of awareness, and low trust between financial institutions and females.
An extensive research shows that the root cause of these discriminatory practices is the ambiguity of the policies provided by the SBP. Due to lack of professional training, every bank uses its own version (understanding) of the policies and directives provided by the SBP. In fact, even if we switch from one desk to another within the same branch, we might hear a different policy which is usually homemade by the employee. Unfortunately, the customer service in Pakistan’s banking sector doesn’t help clients in fact further complicates simple processes.
It is high time for the government to understand that women’s inclusion in the financial sector is imperative for overall economic growth of the country. The government and regulators should give targets to financial institutions to ensure gender-based lending in order to increase financial inclusion and the trend of female entrepreneurship.
Women branches set up by some of the banks are a good initiative. The SBP and other regulators should make this feature a part of their branch license policy for improved financial inclusion.
But the immediate focus should be the lack of awareness of women of the financial services available for them. This issue is common not only in far-flung rural areas, but also in urban centers. The government should make efforts to remove legislative and policy-level hiccups and initiate financial literacy programs at school level for girls. Moreover, all the banks should provide formal trainings to their employees about providing their services in a respectful, gender sensitive way. Only then can we successfully include women in the financial institutions, hence adding in the formal economy in the country.
The author Laraib Nisar is a Defense and Strategic Studies’ graduate, working as a Research Associate at the Center for Research and Security Studies (CRSS), Islamabad.
