Due to the increasing level of financial exclusion, individuals are without access
to common financial services. These can include but are not limited to: savings
accounts, loans, cashless transactions, credit, and other traditional banking
services. The central bank’s third quarterly report, titled ‘Private Credit
Bureaus in Pakistan – Enhancing Credit Penetration by Addressing Information
Asymmetries’ provides valuable insight on actions that may allow for the
augmentation of credit penetration and greater financial inclusion within the
A high level of government borrowing has reduced the financial capital available
to private sector firms, as well as lead to trade imbalances and even financial
crises and Pakistan’s private sector credit to GDP ratio did not fare well; roughly
17.4% in 2010-2019, in comparison to a whopping 18.5% in the 1990s. This ratio also fell short when compared to neighboring countries; India was able to muster a 97% ratio, Bangladesh: 44%, and Sri Lanka: 40%. The SPB report shed light on the role of private credit bureaus in boosting credit offtake. Extensive
coverage of data-related services which are presented by credit bureaus across
the world has been linked to the incrementation in private sector credit, the
reduction of credit cost, as well as a decrease in non-performing loans.
The current credit bureau coverage lists around 14.9 million individuals, with 12%
of adults under the SPB’s electronic credit information bureau, and another 7%
under the two private credit bureaus known as ‘DataCheck’ and ‘AISL’. As per this
the report, it is a plausible conclusion that Pakistan requires greater coverage of adult
population in private credit bureaus, which, other countries with decent credit
penetration has been able to procure.
Non-financial data becomes a turning point for those individuals who had limited
exposure to formal financial institutions. Regularly, Pakistanis are now
able to bring about abundant units of information known as data points, which
can be collected and amalgamated into significant insights with the use of new
computing solutions and meticulous selection of criteria or benchmarks that are
tailored to meet the demand of the local market.
Examples of such data points include consumer data deriving from the usage of
services such as cellular airtime recharge, household payment patterns, regular
spendings, irregular purchases, and other payment transactions that may be card
based or wallet-based. Non-traditional data such as tax filings and court rulings
maybe another method to identify individuals meeting the benchmark for
permissibility of loans and other forms of financial services.
These methods, however, bring their fair share of hurdles. Initially, freeing up such
alternate data is a difficult task as the non-financial service providers who control
such data must become involved in this process; they must become members of
credit bureaus for smooth and continuous data exchange. With a massive telecom
density, payments related to telecommunications and usage data provide a
variety of insights to explore. Nevertheless, since there are restrictions and
limitations on telco’s data sharing policy with third party individuals and
organizations, the telecoms regulators will have to assess and go over the already
existing policies and figure out how data can be shared while remaining within
those policies as well as keeping in touch with data privacy.
Other domains, such as the utility domain (besides K-electric), has not been provided
access of utility payment data, to credit bureaus. Most electric and gas
companies have shown hesitation to share such information, despite a
government directive ordering them to, which can be dated back to April 2020.
Furthermore, often, multiple families or individuals reside in one house and the
billing meters can be in the name of the owners of the house instead of those
who are actually using the utility services To resolve such an issue, the
government must take steps that include firm encouragement for utility firms to
share data with credit bureaus, as well as the inclusion of a mechanism which
allows for the actual users of utilities to be noted down, as opposed to the house
Though a change in the legal and regulatory amendments to bring forth an alternate data eases such data collection, there are other issues in this process, cited by the special report. Such an issue is the creation of databases that properly record
transactions such as monthly rental payments, and events like court decisions
that influence individuals and entities. This, however, is not a short-term process,
and the special report points out an urgent need for a national consensus on data
and policy reform majorly directed towards conveying the data needs of the country.
At the same time, the report also points out a need for having certain symptoms that can warrant data validity, accuracy, linkages, and preservation across various
The central bank surely has given forth fascinating information regarding financial inclusion, however, two big limitations remain prevalent in using alternate datasets to meet a particular goal. Primarily, in low trust environments full of passive aggression, and in a leakage-prone marketplace such as Pakistan, ensuring data privacy of individuals and firms is a rather difficult task. It is difficult to
predict how comfortable an individual would feel in having several aspects of
his/her wallet activity made public to third parties. Moreover, it is highly unlikely
that many bankers would accept individuals that arrived with decent credit scores
but lacked collateral.
Even so, such an alternate form of financial inclusion seems a satisfactory attempt