Pakistan is on the path to digitizing a large share of its government flows to people. The country serves as an example of how public and private institutions together can move a country towards a digital financially inclusive system. Government and public actors have created the enabling environment and provided seed funding, while private actors are developing the infrastructure and services and developing a long-term business case. The initial efforts to distribute social cash transfers electronically have now been expanded to include a wider variety of government flows. In fact, social cash transfer programs constitute about 11% of total government payments, while salaries make up 68% and pensions 21%. Among social cash transfers, the Benazir Income Support Programme (BISP) represents the largest in terms of number of beneficiaries and volume of payments. CGAP estimates that if things keep moving forward, as they have in recent years, within 5 years over 75% of government flows could be digitized.
The digitization of government flows builds in part on the progress made by the industry and the regulators to grow the branchless banking industry. This industry has been moving at a steady pace in Pakistan over the last few years. More than 1.8 million branchless banking accounts have been opened and there are more than 31,000 agents in almost 90% of Pakistan’s districts processing more than 10.4 million transactions monthly. Six more banks have recently obtained approval for branchless banking activities and are carrying out pilots. Going forward, there is interest from the banking sector to design suitable products linked to digital government flows.
This report provides an overview of the government-to-person (G2P) payments sector in Pakistan, highlighting the progression of payment mechanisms and the ways in which the growing branchless banking industry has facilitated this. While some level of detail on schemes, providers and monetary flows are included, the broader aim is to provide an overview of the digitization of the government flows and to explain the role of both public and private actors. The report has three sections: (1) Status of branchless banking in Pakistan, where we highlight key deployments and the role of regulators and donors; (2) Overview of G2P payment schemes, where we detail the flows and implementations involved in both social cash transfers and government employee salaries and pensions and provide a brief history of those flows; and (3) Challenges and opportunities in digitizing government flows, where we briefly discuss key lessons from the Pakistani experience.