The effect of Branchless Banking on Financial Performance of Banking sector of Pakistan Introduction Background of the Study An institution referred to as bank

The effect of Branchless Banking on Financial Performance of Banking sector of Pakistan

Introduction

Background of the Study

An institution referred to as bank, deals in cash and its substitutes and provides different monetary services to the general public ,referred as banking.

Origination of Banking

The word bank springs from the word banque or bancus. The history banking is started back too early in 2000BC .In Balkan state the priest in earlier days accustomed keep money and valuable things of people with in church, and there for priest charge a specific fixed amount of the money against the money they confine in the church. The bank conjointly derived back to early Goldsmith. Thus, at the beginning stage of the development today’s banking was to simply accept the deposited money from those persons who has surplus cash with them.

They issue receipts for the money deposited with them, that were passing from hand at hand for the settlement of dealing as a result of people had confidence within the integrity and solvencies of Goldsmith, then the receipts were drawn in such how that they entitled any holder to the required amount of cash from Goldsmith. The receipts are the sooner bank notes. The second state within the development of banking was the difficulty of the bank notes might simply lend. It commonly allowed draft facility to their depositors, this was the fourth stage within the development of banking once each cash investor issued receipts and most of them allowed the draft facility , there was then an excessive amount of confusion within the industry, that caused widespread distress among the people.
To create confidence amongst the people plenty of steps were taken to control the banking organization, the conference was control in listing 1548 and it had been determined that a bank ought to be setup by the state, that ought to contour the industry and technique. the primary financial organization was established in Geneva in 1578 and Bank of England was established in 1964, the trendy industrial industry was established in nineteenth century.

Now a days Banking sector is consider the most important resource of finance for customers and moreover as for corporations. Banking sector is enjoying a promising role within the boost of economy of a country . Banks play extraordinarily necessary role in modern economy within the kind of trade and commerce by short loans and in managing exports and imports. so a well developed banking sector is extremely necessary business for the event of a country .The bank draw cash from people who has more cash than their expenses, therefore the bank then provide that cash to the opposite those who required the money. the most distinction during this all state of affairs is that the bank take {the cash the cash the money} from people who has excess money than their expenses on low rate of interest and provides that money to the those who want the money on high rate of interest. The distinction between the top and low charge per unit is that the profits of the bank through that they pay all expenses of the bank and regular payment of the employs.

With passage of time technology advancement amendment the way of life of people and also the ways of their trades and managing of their businesses. Such kind of technology conjointly befell within the banking sector to facilitate the customers with the simply handiness of economic services to draw in the shoppers and to expand their business. The main purpose of introducing technology in the financial institution is to facilitate the customers by providing them 24 hours services and also not for the customers but as well as to the un-banked people. The technology introduced in the financial institutions is called BB which has categories such as agency banking, electronic banking and mobile banking.

BRANCHLESS BANKING

BB is also outline because the banking that enables monetary establishments and different industrial monetary organizations to supply monetary services outside the traditional or conventional or Islamic and microfinance bank boundaries by victimization delivery mediums for instance retail agents, portable. Branchless Banking (BB) is accustomed effectively increase the monetary services handiness to the un-banked customers. BB involves the delivery of financial services outside conventional bank branches, using retail agents or other third-party intermediaries as the principal point of contact with customers, and use of technologies such as card-reading point-of –sale (POS) terminals and mobile phones to transmit transaction details (CGAP, 2011). Banks are being innovative, largely due to intense competition and they are therefore at the forefront of new developments, not only in banking but also in wider financial markets (Faure, 2013). BB concept began in South America specifically in Brazil and Mexico (CGAP, 2008. Agency banking involves the provision of financial products offered by banks at premises away from the conventional banking premises (Modupe, 2010). Mobile banking is a system that allows customers of a financial institution to conduct a number of financial transactions through a mobile device such as mobile phone or personal digital assistant. According to Guitterez and Singh (2013

Branchless Banking in Pakistan
In Pakistan banking sector playing a vital role in the development of economy of Pakistan. At time of independence of Pakistan , Pakistan was facing shortage of financial resources to run the financial resources of Pakistan. At that time Pakistan had only one bank Habib bank which was incorporated in 1942 and in 1948 state bank of Pakistan was incorporated. “According to state bank of Pakistan the numbers of scheduled banks operating in Pakistan were 34 in June 2107 with the number of branches of 13039. The total amount of deposits were 11,592.1 billion and the total borrowing were 2598.6 billion at the end of June 2017. The total loan were 6174.9 billion and the Total liabilities/assets of all Scheduled Banks stood at Rs. 24,618.6 billion at the end of June 2017, increased by Rs. 1,996.6 billion (8.83%) and Rs. 2,857. billion (13.13%) (statistics on schedule banks in Pakistan by state bank June 2017)”
The state bank of Pakistan is playing an important role to deliver the financial services 24 hours to the banked and un-banked people. In Pakistan the BB was first introduce by UBL bank with the name of UBL Omni in 2005. In 2005 state bank of Pakistan did not issues regulation for the BB in Pakistan. State bank of Pakistan issue the BB regulation in 31 march 2008 which is later on updated on February 2010.
According (payment system review by SBP. January-march2017) “ATM network has grown from 12,352 to 12,515, showing a growth of 1.3% compared to the previous quarter. Out of total 12,515 ATMs 10,330 ATMs are On-Site ATMs 2,181 are Off-Site ATMs and 4 Mobile ATMs. There are 9 ATMs per 100,000 adults6 in Pakistan.
According to (payment system review by SBP January-march2017) “POS network has grown from 52,062 to 52,854, showing a growth of 1.5% as compared to the previous quarter and for every 100,000 adults in Pakistan, there are 40 POS in the country.
According to (payment system review by SBP January-march2017) “. Internet Banking is offering by 24 Banks/ MFBs whereas Mobile Phone Banking and Call Centers/ IVR Banking are being offered by 18 and 17 Banks/ MFBs respectively.
According to(statistics on schedule banks in Pakistan by state bank June 2017)
There were 402,710 number of agents in which 185 297 are active BB agents providing financial services to the people. The number of accounts maintain in BB were 27,312,964. The average number of transaction per day were 1,857,476 and the average deposit per account was 565.. Encouraging growth of 21% in BB accounts to reach at 33 million .M-wallet share in customer oriented transactions rose to 66% and Rs. 30.6 billion disbursed on account of social welfare payments. Female share in BB accounts remained 22%, whereas Sindh represents highest share of female accounts are 25% followed by Punjab (22.8%) and Azad Kashmir (21.5%).

According to SBP’s statistics, there are 5.06 branches per 100,000 people in Pakistan as opposed to the global median of 8.4 branches for every 100,000 people. which is very low as compare to the global median. To get the global median Pakistan needs another 5.517 branches in addition to 8.343 .the statistics shows that the Pakistan need to increase their branches about 66% .(SBP branches quarterly news letter jul-sep 2017)
A total number of 164.7 million transactions worth Rs. 726.4 billion were conducted during the Jul-Sep 2017 quarter. Figure 2 shows the break-up of these transactions, showing that the Customer Oriented transactions contributed 96.9% and 63.5% in volume and value of BB transactions respectively, whereas the remaining were agent transactions for liquidity purpose. .(SBP branches quarterly news letter jul-sep 2017)

The customer oriented transactions are further divided into Over The counter-OTC and mobile-wallet transactions. The mobile-wallets, in terms of volume and value remained 104.8 million and Rs. 246.4 billion, contributing a share 65.7% and 55.4% respectively. .(SBP branches quarterly news letter jul-sep 2017)

It may be noted that the BB transactions declined by 1.47% and 2.69% in number and value respectively from the previous quarter, due to decline in OTC transactions. SBP made it mandatory for the banks to conduct Person-to-Person transactions (also called CNIC to CNIC) only through the Biometric Verification System (BVS) devices starting July 2017. Since an installation of BVS devices is still underway at a number of agent locations, this led to a decline in OTC transactions, thus exhibiting a downfall in overall BB transactions. .(SBP branches quarterly news letter jul-sep 2017)

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