Abstract

Branchless banking or mobile banking is a relatively new approach in our financi

al, economic and technological perspective. The industry is in the growth stage.
According to World Bank, in the introduction stage of this technology, Pakistan
was regarded as the fastest growing mobile-banking industry of the world. The
progress has declined a bit but a competitive environment is building up in this
industry with the entry of Cellular Companies partnering with Microfinance Inst
itutions (MFI s), and a few banks demonstrating a risk-taking strategy by introduc
ing mobile banking initiatives, to capture the unbanked population of the countr
y. According to recent studies by State Bank OF Pakistan (SBP), around 15% of ou
r adult population is using banking services and around 10-15% is using mobile b
anking. This means that more than 60% of the adult population is unbanked. So, t
hat leaves a wide gap of income that remains unaccounted for, which is affecting
the tax-base and the economic efficiency of our country. The reasons behind th
is gap may be due to economical, social, cultural, religious or educational barr
iers that exist in our geographical perspectives. The studies show that the othe
r countries in the world like Kenya and India etc are rapidly progressing in thi
s industry, are taking it more seriously. Our purpose in this study is to analyz
e whether we are lagging behind or not, if yes what are the reasons and what sho
uld be done by financial institutions to cover this gap. _______________________
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Introduction
Growing technological advancements in the fields of arts, science, medicine, tec
hnology and finance induces developing nations to enjoy growth opportunities equ
ally in accordance with the modern world. The interdependency of global economy
has increased to such a great extent that economic conditions of one country gre
atly affect the economic conditions of the other countries across the regions. N
ow-a-days, developing countries are continuously trying to improve their
Arshad (2014). Asian Journal of Research in Banking and Finance, Vol. 4, No.9, p
p.261-281.
262
economic conditions and access to cutting-edge technology with their own capabil
ities and resources, rather than waiting for the developed countries to pass on
the technology after the market gets saturated in their regions. Financial insti
tutions like banks, microfinance institutions MFIs and other intermediaries play
a vital role in determining the economic activity of a country. In order to ach
ieve a prosperous economy, a country must develop a sound banking system with pr
oper rules and regulations in place. Developed countries are privileged with abr
oad access to financial services in various forms but there is potentially large
number of unbanked population in developing and under-developed countries that
can be brought into financial circle to bring an economic boost up. According t
o a research study, Banking the poor: The role of mobiles done by Robert E. Hinson
, almost 90% of population in developing countries is deprived of financial serv
ices for loaning or savings, which in turn makes them to remain in poverty for t
he rest of their life. Financial inclusion may be described as a condition where
most of the people have access to basic, appropriate and needed financial servi
ces to carry out their financial management. It is attained by spreading financi
al awareness in the people and providing access to product and services, irrespe
ctive of their financial status (the national forum for financial inclusion, 200
7). There have been suggestions for the traditional banks to increase their geog
raphical expansion by opening up branches in the rural areas of the countries to
reach the unbanked population. But this cannot be possible for the developing c
ountries due to lack of available resources. This is where the mobile or branchl
ess banking intervenes, providing a cost-effective solution where mobile compani
es and financial institutions can partner along to reach the unattended and unba
nked low income population. The agent network of these institutions may work thr
ough retail stores, post offices, and gas stations etc., it will create jobs and
accessibility issues will be ruled out. Mobile banking is the most efficient, c
ost effective and developmental cash transfer mechanism that can lead a country
to economic prosperity. Mobile phone is the ideal device because it has already

access to a large population and is already feasible for all income levels. With
the passage of time, banks have developed their services and are adopting diffe
rent means to increase access to customers by adopting service like online banki
ng which facilitates customers to access their bank accounts from anyplace with
internet access. But as cellular services are more easily adopted by customers a
nd attract attention easily, more and more products are getting into the market
and many are still in developing stage related to technology called mobile or bra
nchless banking .
According to World Bank study, world population is around 7 billion and almost 8
0% of population is registered user of cellular services, 1.9 billion have bank
accounts and 1.8 billion credit cards (World Bank Data, 2013). These figures dep
icts that a huge proportion of world population is deprived of financial service
s. Low income population exists in a cash world and avoids availing financial se
rvices because of low income, lack of awareness, limited access to financial ins
titutions in rural areas and high service charges associated with these services
. All of these factors contribute a large share to keep a major part of populati
on unbanked or unaccounted for.