The govt wants your telco to finance your next smartphone if you can’t afford it. But how?

ISLAMABAD: The Ministry of Information Technology and Telecommunication has finally prepared the draft policy for smartphone financing. It is going to share the policy with stakeholders next week in a move to provide people with smartphones on instalments.

As per details, Pakistan’s Ministry for Information Technology and Telecommunication (MoITT) has finalised the ‘Smartphone Financing Policy,’ an initiative that aims to make smartphones accessible to a wider population. Despite initial reservations from some key stakeholders, caretaker IT minister Dr. Umar Saif is resolute to implement the policy, paving the way for affordable smartphone ownership across the country.

The draft policy is set to be shared with representatives from the four cellular companies and fintech firms in the coming week, marking a crucial step toward its implementation. Dr. Umar Saif, during a media briefing, expressed confidence in the policy, assuring the public of positive developments in smartphone accessibility through easy instalment plans.

Why is it needed?

Out of 190 million mobile users in Pakistan, 48% mobile users are on outdated 2G mobile phones. And fostering a digitally competitive economy is very difficult when half the population does not have access to smartphones and internet. Therefore, the caretaker government eyes to increase digital inclusion through this policy.

Over the course of the last 3 years, the average smartphone price in Pakistan has gone up by $30, despite localising some of the production. A large chunk of that can be attributed to the depreciation in the value of the rupee.

Why has it not been done yet?

Despite the cell phone financing being a no-brainer and an established market practice across the world, Pakistan has not been able to actualize it. 

As previously covered by Profit, all across the globe, telecom operators buy smartphones in bulk and sell them to customers in easy instalments. However, in Pakistan, telecom companies fear to do so because of lack of collaboration from banks, high exposure and lack of customer loyalties.

“Phone loans are unsecured. Financing for phones exists for credit card customers, using their cards as collateral,” explains Muhammad Naqi, CEO of Premier Code. Most Pakistanis do not own credit cards. According to Karandaaz, only 1.9 million credit cards existed across Pakistan in December 2022. A majority in Pakistan uses prepaid sims, discounting them as a probable market for a long-term incentive. 

Another problem is with the network lock. Globally, IMEI of phones on instalments are locked on one network’s sim so as to ensure the telco’s incentive of providing the phone on instalments.

However, talking to Profit previously on the matter, the COO of Telenor, Khurram Ashfaque said that the telecom companies in Pakistan are fearful to do so because of a prevalence of “jailbreak” technologies in the local market. Handsets procured through loans can be effortlessly unlocked in the open market,

What is being done?

Sources said that the Ministry of IT&T with the help of Pakistan Telecommunication Authority (PTA) is working to develop a mechanism to block the IMEIs of those mobile phone users who will not pay their instalment in time.

Dr. Saif revealed that extensive consultations, involving four meetings, have taken place with various stakeholders, including telecom companies, financial institutions, and regulatory bodies such as the PTA and Groupe Speciale Mobile Association(GSMA). He emphasised the need for a robust mechanism to protect investors from defaults, suggesting measures such as blocking mobile phones and, potentially, national identity cards of defaulters.

While some telecom companies have opposed the idea of a centralised system to block SIM cards associated with defaulters, they have shown enthusiasm for offering smartphones through instalment plans. The banking sector, however, has expressed concerns about the high costs associated with managing mobile phone loans.

A notable initiative in this direction has already been undertaken by Jazz, Pakistan’s leading telecom company, with its instalment-based handset financing program, ‘Jazz Digit 4G,’ in collaboration with KistPay. Upon policy approval, companies like Jazz will have the opportunity to directly offer smartphones to customers through instalment plans, thereby expanding the benefits of mobile broadband, especially among low-income segments in Pakistan.

Despite the opposition from certain quarters, sources within the ministry have indicated that the MoITT is likely to proceed with the policy implementation, considering its potential to accelerate digitization and align with the GSMA’s vision of ‘smartphone for all.’ The policy’s imminent notification reflects Pakistan’s commitment to bridging the digital divide and ensuring that the advantages of technology are accessible to all citizens.

The Ministry thinks that by doing so, the government will not only assemble new phones in Pakistan but FBR will be able to collect more taxes.

Meanwhile, the caretaker Minister for IT&T on Thursday also informed a delegation from Rwanda, led by Senate President Dr. Kalinda Francois about the upcoming smartphone instalment program.

The minister added that discussions were underway to address the necessary prerequisites for the potential export of mobile phones to Rwanda.