In order to increase access to financial services for the vast majority of the people, the government has announced a National Financial Inclusion Strategy in the next budget, under which various initiatives have been proposed.
Finance Minister Ishaq Dar, during his budget speech, has announced that Rs 8 billion funds will be created at the State Bank of Pakistan to provide loans to low-income segments through microfinance banks. In order to facilitate transactions through mobile banking, e-gateway systems; the government is establishing an e-gateway system at the SBP at a cost of Rs.200 million.
He said technical training and handholding of the service delivery organisations shall also be undertaken through the project. Besides exemption from withholding tax on Cash Withdrawals by Branchless Banking Agents- exemptions on withholding tax will be given on withdrawal of cash from branchless banking.
According to the minister, Small and Medium Enterprises (SMEs) are the backbone of any economy. Unfortunately, the growth of SMEs is stunted in Pakistan. Any growth that we witness is in the informal sector. The following new measures are being announced: (a) Access to finance for SMEs: The biggest constraint of the SMEs sector is access to credit. Banks are generally reluctant to offer credit to the SME sector because of high risk attached to the sector. In order to enable banks to provide financing to SME sector, the government is planning to introduce Risk Mitigation Facility for Small and Medium Enterprises through funds of Rs 3.5 billion be established at the SBP. The facility will cater to both Islamic and conventional banking products.
Innovation Challenge Fund: Investment in new technologies is imperative to give impetus to small businesses to keep pace with the changing market requirements. To cater this requirement of SMEs, the government is announcing the establishment of an Innovation Challenge Fund with Rs 500 million.
