GVS: According to a World Bank study only 13 percent of Pakistanis have formal bank accounts – over 100m people are unbanked that need to be given financial inclusion. Why is it important to increase the number of account holders – what does it mean for the country?
Tariq Jamali: Lack of financial inclusion leads to a rise in various forms of socio-economic inequalities other than poverty, chief of which is a lack of education. In Pakistan, about 75 percent of the unbanked population has completed primary education or less.
The individuals who are financially included may invest in education, business, and entrepreneurship that can lead to poverty reduction and economic growth of a country. For a better future, financial inclusion provides opportunities to individuals who can foster financial stability by making safe deposits in banks for difficult times.
The increased deposit base in banks not only gives financial stability to an individual but also gives economic contributions to a country’s financial growth. Furthermore, reliable and ready access to financial services is needed by people to uplift their quality of life. Savings, credit, payment, transfers and insurance services have become necessities of the modern age.
GVS: What policies should the government implement to increase the numbers of banking accounts?
Tariq Jamali: Government policies should focus on a number of areas to increase banking accounts First, promoting digital transaction accounts and reaching scale through bulk payments is very important. Second is to expand and diversify access points, as well as improving the capacity of financial service providers.
Emphasis also needs to be placed on increasing levels of financial awareness and capability among the population. Governments need to create incentives for the private sector to use electronic payments instead of cash when paying for their invoices and salaries; this can greatly increase the number of bank accounts in the country.
Lastly, establishing a consistent regulatory and oversight framework for all payment and settlement systems for banks and non-banks are essential for creating an atmosphere of opening new bank accounts.
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GVS: There is a lot of criticism on banks about not giving out loans to invest in manufacturing/productive sectors but rather rely on buying government bills to make profits. How do you think we can change this?
Tariq Jamali: The main goal of any organization is to see its top-line and bottom-line growth. It means both profitability and growth in assets are important to be successful and remain in business. It creates value for our stakeholders. NBP handles one of the largest corporate portfolios (made up of loans/advances/non-funded obligations/deposits) amongst all banks in Pakistan.
Our aspirations come from our extensive market outreach, strong capital base, optimally diversified and strong balance sheet, customer loyalty and an ambitious team. We aim to be the best and most innovative bank in Pakistan by meeting all business needs of all segments of the economy and rapidly growing SME sectors, Islamic banking, global home remittances and cash management.
Over the years, NBP has continued to diversify its business portfolio and improve asset quality by high-quality loans, diversified into new sectors, established new relationships, and deepened its wallet share with its existing customers. NBP’s well-diversified portfolio comprises Energy/Power, Textiles, Telecoms, Fertilizer, Food & Allied, Cement, Sugar, Steel, and many other important segments of our national economy.
NBP believes in maintaining its long-term relationship with corporate clients. NBP not only stood by the nation at the time of calamities but is fully committed to play its roles in different projects of paramount national importance across Pakistan. We have funded projects where other peer banks hesitated to enter due to the risk involved.
Like Punjab Thermal, Quaid-e-Azam Thermal, Neelum Jhelum, etc. On the manufacturing side – we have clients like ENGRO, Fauji Group, Fatima Group, Masters Group, Atlas Group, Attock Group, and others. Thus, we can conclude that NBP lends to manufacturing/productive sectors apart from relying on Government bills.
It is also evident from the Balance sheet figures as of the last financial year, June 30, 2018, that the proportional increase in NBP advances is higher than the increase in Investment/Government borrowings.
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GVS: Which segments of the bank operations are you targeting as growth areas for National Bank?
Tariq Jamali: NBP is focusing on addressing priority sectors like financing for small & medium enterprises, agriculture, consumer loans, Islamic banking and greater financial inclusion. NBP is also planning to bring new products and product variants to tap new segments of the market.
At the same time, we have undertaken various initiatives to leverage digital advancements in the financial sector for its growth. It can be foreseen that the future belongs to those organizations which can keep pace with the burgeoning trend of digital transformation and are able to tap the technology to offer products and services to their clientele.
The digitized solution will not only facilitate enhancing financial inclusion of a vast proportion of the country’s unbanked population, it will also pave the way to offer products and services to existing customers effectively and efficiently.
NBP in line with the government’s vision also aims to bring financing products to cater to housing needs of the country as well as to create employment opportunities for the youth through SME loans. Moreover; NBP being the public sector bank is fully geared in supporting the government’s initiatives which are aimed at bringing growth and development for the country.
GVS: How big is your international network – there is discussion of doing currency swaps especially with the Chinese – will these be done via NBP? Do you have branches in China?
Tariq Jamali: With international branches/offices in 19 countries, NBP is one of the largest international franchises amongst Pakistani banks. International operations of the bank comprise of 21 branches spread over North America, Europe, Far-east, Asia, Middle East & the only Pakistani bank having three branches in Central Asia and two fully-owned subsidiaries in Central Asian countries. Representative offices in Beijing, Toronto and Tashkent.
NBP has already established accounts with Bank of China & Industrial Commercial Bank of China for currency swaps, and the settlement mechanism is in the final stage of the agreement.
National Bank of Pakistan established its representative office in Beijing 1981 and was the first one among the Asian banks to establish an office there, with the view to have its footprints in one of the friendliest countries for Pakistan. NBP now plans to upgrade this Rep Office into a branch.
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GVS: In October there was a panic in the market as many banks stopped credit card international transactions – with some talk that over 20,000 people were affected. How do you ensure at NBP that such issues are kept at a minimum?
Tariq Jamali: The protection of confidential information from unlawful and unauthorized access is crucial in nature for every financial institution. The banking industry regulator i.e., SBP has already categorically rejected the news in media that thousands of credit/debit cards were compromised.
It has already been clarified by both SBP and PBA that such a thing did not happen and there is no evidence to this effect nor this information has been provided to SBP by banks and law enforcement agencies. In fact, there was only one incident in which IT security of one bank was compromised on October 27, 2018.
Some banks have just temporarily stopped their credit cards’ international transactions to review and further strengthen their cybersecurity. There was no hacking or data breach of NBP systems/ networks and a press release was already published in the newspapers to assure our customers that their data is protected.
NBP has already taken steps to strengthen its information and cybersecurity by setting up a separate office of information security under the risk management group. Revised the information security policy or other frameworks keeping in view the latest cybersecurity-related requirements and best practices is another thing NBP has been working on.
Moreover, bank-wide training on information security awareness using online learning tools and training sessions in major cities have been conducted. The bank is also moving towards the chip based (EMV) cards to avoid card skimming. In addition, NBP has also made the information security strategic plan that includes systems based automated security tools in future.
Tariq Jamali: GVS: How is the mobile phone banking business (JazzCash/ Easy Paisa) affecting the traditional banks? Do you feel it is competition on an equal footing?
For NBP, it is a different story altogether. Instead of taking it as competition, we believe in a win-win situation for the mobile money players like Easy Paisa, JazzCash and for mature banks like NBP. We have a strategic partnership with these players and have successfully launched or rolled out multiple services/projects affecting positively to the life of masses.
Moreover, with more digital services to launch in future, we believe in using mobile money network as an added channel for NBP Customers, which they will be interfacing for many walk-in transactions like domestic remittance, cash withdrawal, cash deposit, etc.
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GVS: Does this mean that traditional banks should now get into more value-added services – providing insurance, funds, etc.
Tariq Jamali: Yes, as mentioned above, we will be launching new services and will be leveraging on the presence of mobile money players in the rural & remote urban areas to increase the outreach of NBP beyond its branch network & ADC Channels. Banks must structure highly relevant and possibly simplified financial solutions that meet specific customer needs at an affordable cost.
They can do this by developing deeper customer understanding and offering a compelling value proposition. With the right mix of innovative products and services, institutions can earn the loyalty of new customers and drive cross- and up-sell opportunities.
Although innovative alternate channels may have the lowest operational costs, effective financial inclusion will likely require a “bricks and clicks” distribution model that includes physical branches to build trust and confidence, perhaps supplemented by correspondent agents (such as post offices and supermarkets). Such a model can still operate efficiently if automation is employed effectively with no-frills mini-branches, kiosks and correspondent agents offering standard products.