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Pakistan’s NFIS initiative leverages digital identity for financial inclusion

Categories Biometrics News  |  Financial Services  |  ID for All  |  In Depth
Pakistan’s NFIS initiative leverages digital identity for financial inclusion

Significant headway has been made in making digital financial services available to Pakistanis, with 60 percent of adults now benefiting from them under State Bank of Pakistan (SBP’s) National Financial Inclusion Strategy (NFIS). Despite this, large obstacles still persist, such as Pakistan’s vast financial exclusion gap. In navigating these difficulties the integration of innovative solutions like Asaan Mobile Account, Asaan Digital Account & RAAST payment system with established mobile digital identity & branchless banking frameworks.

To deal with the unbanked population with low levels of financial inclusion, Pakistan introduced the NFIS in May 2015 as part of its drive to promote digital banking and economic inclusion. It aims at achieving universal financial inclusion by increasing access among 50 percent of the adult population initially by 2020. Pakistan’s NFIS took on board gender considerations but did not achieve targeted goals regarding women’s financial inclusion.

In January 2023, SBP approved initiatives including the establishment of five digital banks based on digital identity and using technology to tap into the more than 100 million unbanked adults in the country.

Research reviews of NFIS

Research published on Science Direct on financial inclusion in South Asian countries points out that Pakistan is one of the least inclusive countries financially in the region, together with Afghanistan. The results stress gender, age, wealth, and education as some of the socio-economic and demographic factors that affect access to financial services in Pakistan. The study further highlights policy interventions like the National Financial Inclusion Strategy that can help overcome these barriers. However, despite the challenges identified, there is still a chance for potential targeted policies to increase financial inclusivity which will also drive economic growth through empowering different groups, especially those living below the poverty line in Pakistan.

A recent report from the Asian Development Bank reveals considerable gender discrepancies in Pakistan’s economy. Despite improvements in financial inclusion, women are largely excluded, with only 8 percent having formal financial accounts compared to 30 percent of men. The lack of defined targets for women’s access to finance under Pakistan’s NFIS for 2015-2020 exacerbates the problem. Furthermore, gender-neutral legislative and regulatory frameworks limit women’s engagement in the financial sector. The World Bank’s Women, Business, and the Law Report 2023 rates Pakistan low, reflecting a legal system that discourages women’s economic participation. Policymakers lack the necessary gender-disaggregated data and research to inform women-centric policies and close the gender gap. Regulators can play a leading role in creating an atmosphere that promotes women’s financial inclusion.

Key initiatives under NFIS Pakistan

Press release issued by the SBP, Governor Jameel Ahmad highlighted the importance of an inclusive financial sector in fostering broad development and improving the effectiveness of monetary policy. The central bank’s commitment to advancing financial inclusion can be seen in various national strategies and programs such as the NFIS, National Financial Literacy Program, and Banking on Equality Policy.

Given these efforts, SBP has launched several initiatives under NFIS planned to provide for different segments of society. Some notable projects include RAAST, ASAAN Digital Account, ASAAN Mobile Account, and the recent introduction of Digital Banks. Furthermore, there are also specific programs like SME Asaan Finance Scheme, Refinance and Credit Guarantee Scheme for Women Entrepreneurs, and Prime Minister’s Youth Business and Agriculture Loan Scheme which target expanding access to finance among underprivileged communities.

 NFIS vision and challenges

The NFIS paves the way for the future of finance in Pakistan. It aims to bring about universal access to a wide range of high-quality financial services by 2025. The idea is not limited to traditional savings and current accounts but includes digital transactional accounts too; so that everyone who uses a digital ID can have fair access to different types of payment systems, savings, credit facilities as well as insurance coverage.

The NFIS commences to achieve these goals by prioritizing improvements in the distribution network for financial services, particularly within underserved rural areas. It also recognizes that there are systemic barriers that prevent marginalized groups such as women from having easy entry into basic financial accounts; hence more needs to be done to make them accessible.

Another key objective of this strategy is promoting financial literacy and capability among people thus enabling them to make better decisions about their money matters. Also highlighted within the plan is a stable know-your-customer (KYC) regime, enhancing national payment system resilience as well as shifting significant payment flows from cash onto digital platforms. Pakistan plans its course towards 2025, the NFIS serves as guiding inspiration, driving intensive efforts to create a more inclusive financial environment where every individual and enterprise can access a wide range of quality financial services designed to their needs and aspirations.

NFIS’s effort, backed by digital identity solutions and innovative banking initiatives, represents a significant step toward financial inclusion and economic empowerment. Despite tremendous progress, challenges remain, particularly filling gender gaps and reaching vulnerable groups, moving forward, to resolve these challenges and guarantee that the NFIS’s aim of universal access to high-quality financial services is realized for all Pakistanis by 2025.

The role of biometric mobile banking in improving financial inclusion in Pakistan

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