Health and Healthcare Systems

COVID-19 and the pursuit of financial inclusion in Pakistan

A woman, clad in burqa, counts cash she received from a counter of Ehsaas Emergency Cash program, introduced by the government for vulnerable families due to the spread coronavirus disease (COVID-19), in Peshawar, Pakistan April 9, 2020. REUTERS/Khuram Parvez - RC231G9M7K7Z

A woman counts cash she received from the Ehsaas Emergency Cash programme. Image: REUTERS/Khuram Parvez

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Chief Executive Officer, Gavi, the Vaccine Alliance
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  • Pakistan’s government has launched an emergency cash programme for 12 million households.
  • It has been built with longer-term goals to increase financial inclusion.
  • The programme will help drive a shift in the payment ecosystem, from cash-based to digital.
  • Beneficiaries will be encouraged to promote the benefits of such products in their own communities.

When Pakistan implemented a national lockdown in mid-March, economic activity for the world’s fifth most populous country was brought to a halt. In a country where nearly 40% of people live in poverty and more than 24 million workers either earn daily or piece-rate wages or are self-employed, the ensuing economic crisis has hit the population hard.

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Within 10 days of lockdown, the government had launched the Ehsaas Emergency Cash (EEC) Programme, providing urgent cash payments to 12 million households. This safety-net was rolled out at unprecedented speed, designed in the short-term to offer immediate relief in the form of $75 to the poorest and hardest hit families. The programme, still ongoing, has helped over 9 million families across the country, to date, to weather the initial shock of the crisis.

However, the legacy of this programme is not simply short-term relief. Built into its design are longer-term goals to increase financial inclusion and to strengthen overall safety nets in Pakistan, both of which will bring lasting benefits to recipients and the country as a whole.

The chosen payment mechanism for EEC reflected the need to move fast to respond to the COVID-19 pandemic. Each EEC beneficiary has a Limited Mandate Account (LMA) and has the option of opening a mobile savings wallet linked to this account. Each one of them has gone through the account opening prerequisites, sanctions list screening, and Know Your Customer (KYC) checks, in preparation for the cash transfers; and all they need to do now is to provide a mobile number in their name and a request at an agent location in order for their mobile wallet to be set up instantly. These mobile wallets will give them the ability to access a comprehensive set of digital financial transaction capabilities, accessible through a mobile app, debit card, QR code, or via agent-assisted transactions.

Provincial breakdown of emergency cash programme disbursed and withdrawal amount
Ehsaas payments as of 3 June 2020.

Currently, emergency cash disbursements are taking place through LMAs allowing the government to make cash transfers without requiring beneficiaries to own a phone. This is important because mobile phone ownership is not universal among the lowest income categories in Pakistan, so reaching those who are most in need cannot be based on using a mobile wallet as a prerequisite.

Furthermore, in most communities where these beneficiaries live, retail shops are not equipped for accepting digital payments because the overall ecosystem in the country is predominantly cash-based. During this time of crisis, LMAs allow users to make cash withdrawals at thousands of Cash-In-Cash-Out (CICO) merchants nationwide and use it directly for transactions. This is a stepping stone towards financial inclusion in Pakistan, as international evidence shows that CICO networks play a critical role in a country’s transition from cash-based to fully digital financial systems.

Typically, beneficiaries from financial inclusion programmes face a steep learning curve as they navigate the financial system for the first time – especially with complex KYC checks, and on-boarding processes. By collecting simple data fields and issuing accounts after basic verification checks, this crisis response has brought new households into the banking system, who can now benefit from greater financial inclusion in the future. By becoming accustomed to tasks like visiting agents, using biometrics, and reading, the poorest families have gained familiarity with the banking process, increasing the likelihood of using similar services in future.

Although the timeframe is more compressed in this crisis response, other countries have followed similar paths to greater financial inclusion. Brazil steered its population into deeper, digital financial inclusion through a similar national cash programme. Payments for the programme were initially made into LMAs, accessed via bank cards. As adoption improved, beneficiaries were eased into providing simplified documentation for bank accounts with greater functionality, eventually including magnetic cards for payments. As a result, 2.5 million individuals opened bank accounts and are using them to make commercial transactions.

For the 4.5 million women already benefitting from the Ehsaas Kafaalat “One Woman, One Account” initiative, partner banks will automatically allow all beneficiaries to link their account to a fully functional branchless banking savings account and transfer their monthly Ehsaas allowance to a personal savings account for future use. Women in particular are more likely to spend their savings on health and education for the whole family, leading to improved outcomes in the next generation. Ehsaas plans to encourage beneficiaries with savings accounts to act as ambassadors and help promote the benefits of such products in their own communities. Women can also be trained to act as point-of-sale agents and, in turn, help other women who find it difficult to engage with an agent network which is currently 99% male.

The EEC has laid groundwork for deeper financial inclusion in the future, not least by expanding the original Ehsaas target of financial and digital inclusion for 7 million individuals to 12 million. The impact of Ehsaas Emergency Cash may actually be more profound, since this initiative has reinforced the value of the banking system. This was demonstrated by millions of non-eligible people also turning up at payment sites in the hope of getting paid.


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However, the readiness of beneficiaries and private partners to take up these financial inclusion initiatives is contingent on factors like establishing a conducive regulatory environment and improving financial literacy. These critical building blocks will be the focus of Ehsaas advocacy, going forward. Telecommunication companies will also be engaged as partners, to provide SIMs at reduced cost for beneficiaries, encouraging penetration of mobile banking. Improving access to mobile phone handsets, which is part of the overall Ehsaas Strategy, will help drive the programme further. Additionally, the evolving unified payment interface—work on which is underway—will facilitate inter-operability of payment service providers, thereby helping with the larger potential shift in the payment ecosystem, from cash-based to digital.

Overall, the Ehsaas Emergency Cash programme not only helps our country respond to the immediate crisis, providing relief for the poorest households in Pakistan, but also puts in place critical building blocks for a stronger and more inclusive financial sector in Pakistan. By creating a stronger and more inclusive economy for all citizens, Ehsaas is building a stronger and more resilient future for Pakistan.

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