Government unveils Five-year Plan for Pakistan’s Economic Growth
Small farmers, low-cost housing, digital payments and a higher share for Islamic banks are the targets of the government’s new strategy for growth.
Access to finance is super important for economic growth that a country can sustain and that includes everyone. With this in mind, the government has unveiled a National Financial Inclusion Strategy for the next five years.
As of 2015, only 16% of Pakistan’s adult population had a bank account. The number of accounts for women was even lower at 11%. This strategy adopted by the previous government led to substantial progress, but more needs to be done. This is why the sitting government has decided to prioritize NFIS as part of its 100-days agenda for the five-year period till 2023.
A person’s ability to access finance is critical to ensure that opportunity is evenly spread in society. It is also linked to helping the poor, the finance ministry said in a document released on Wednesday. However, Pakistan’s level of financial inclusion is one of the lowest in the world, it said. The Prime Minister office will directly monitor the implementation of this plan.
More digital payments
The strategy will help Pakistanis make more digital payments. This includes 100% digitization of government receipts and payments. The government has set a target of 65 million active digital transaction accounts with 20 million accounts by women.
Increase bank deposits through innovative products to attract people’s savings
The government has also set a target to increase the deposit-to-GDP ratio to 55%. Banks will develop innovative and specialized products to encourage people, especially in rural and semi-urban areas, to put their savings in the banking system. This will encourage higher savings.
Promote SME finance
The government’s plan includes giving loans to 700,000 small and medium enterprises to ensure the sector forms 17% of total credit to the private sector. To achieve this target there will be a national SME policy, which will strengthen state institutions that support SMEs. The plan particularly focuses on IT and tourism. The government plans to incentivize banks by offering them tax rebates.
Increase agriculture finance
The government plans to enhance agriculture loans to Rs1,800 billion in its five-year term and serve 6 million farmers through digital solutions. A Kissan Digital Portal will be created. The government will provide subsidies on agricultural inputs to 3 million small farmers through this digital channel.
Enhance Islamic banking
The government plans to enhance the share of Islamic banking to 25% to cater to the people who stays away from interest. The government envisages that the outreach of Islamic banks would be around 30% of total bank branches.
The government plans to standardize and simplify the application form and scale up housing microfinance and revive housing finance companies. The government has planned after holding an industry-wide consultation and analysis.
The government believes that this five-year plan can create 3 million jobs, and lead to a $5.5 billion increase in our exports through enhanced access to finance to SMEs. It will allow reduced income tax (about 20%) on income earned by commercial and microfinance banks on SMEs, housing and undeserved areas for priority sectors.