KARACHI: Pakistanis recently performed financial transactions worth Rs1 trillion via Raast, a quick payment system, in just 16 days, compared to the initial Rs1 trillion transacted over 336 days two years ago, therefore signifying a major change towards the use of digital payment solutions.

Raast has handled 892 million transactions totaling Rs20 trillion, according to the State Bank of Pakistan (SBP), with the most recent trillion being completed in just 16 days. “This reflects SBP’s commitment to making digital payments easier and accessible for all,” it said. According to the data, the average amount paid via the online system was Rs22,421.52.

The Person-to-Person (P2P) module, which was introduced in February 2022, was the primary cause of this volumetric increase in Raast transactions, according to the SBP’s Governor’s Annual Report 2023-24.

The SBP’s launch of the Person-to-Merchant (P2M) module in Raast is one of the ongoing enhancements to Pakistan’s financial markets and digital payments. Customers’ payment options are increased and digital payments are further promoted via this module, which enables businesses to accept payments via QR codes, Raast IDs, bank account numbers, and request-to-pay alternatives. It is anticipated that this move will make conducting business more convenient.

By the end of FY24, there were 215 million accounts, up 18%, maintaining a double-digit growth in the overall number of accounts. The research emphasized that “this rapid growth is conducive to raising financial inclusion in the country.”

The growth of SBP-regulated organizations, including as banks, microfinance banks (MFBs), and development financial institutions (DFIs), whose branch networks increased to 18,355 in FY24 from 17,751 in FY23, helped to sustain the notable increase in accounts. Throughout FY24, these branches supported a sizable customer base and enabled financial intermediation in conjunction with the expansion of alternate delivery channels (ADCs).

The banking industry’s growing branch network is optimistic and is anticipated to significantly improve outreach and financial inclusion in the economy, despite high inflation and a difficult operating environment.

Raast: Revolutionizing Pakistan’s Digital Payment Environment

The banking industry was the main force behind the 21.6% increase in total deposits mobilized by banks, DFIs, and MFBs to Rs33,236 billion in FY24, with deposits rising to Rs32,538 billion, up 21.5% from the year before. The savings and fixed categories saw the largest increases in deposits, which were fueled by an environment of high interest rates.

“This rising trend in savings accounts bodes well for reducing cash preference and improving the saving rate in the economy, which remains low compared to regional peers,” the research stated. According to the governor’s report, the banking sector’s increased markup/interest charges on deposits increased from Rs2,011 billion in FY23 to Rs3,236 billion in FY24, reflecting this expansion.

With outstanding loans of Rs12,650 billion at the end of FY24, the growth in total advances of SBP-regulated institutions remained muted at 0.3%. Nonetheless, investments rose 35.2% to Rs33,271 billion, mostly in government securities. “This marked the second consecutive year of significant growth in investments after FY22.”

The financial sector performed steadily, continuing to offer financial services and loans in the midst of a modest economic recovery in an atmosphere of falling but high inflation. By the conclusion of FY24, the asset base of the financial industry had increased by 21.6% to Rs65.2 trillion. The ratio of financial sector assets to GDP, or financial depth, decreased from 64% in FY23 to 61.5%. Since high inflation generally impedes financial intermediation, this was the second year in a row that financial depth decreased.

In FY24, the banking industry’s net earnings, or after-tax profit, increased by 30.4% to Rs645.2 billion. However, with tax charges making up roughly 52% of pre-tax profits in FY24, growing taxation rates—especially for banks—have become a concern.

“From a financial stability viewpoint, rising taxes has implications for the banking sector’s ability to establish the buffers necessary for withstanding unexpected macro-financial shocks, take risks, and continue lending during low economic growth periods,” the study noted.

By the end of FY24, Development Finance Institutions’ (DFIs’) asset base shrank by 23.7% to Rs2,460 billion, compared to the banking industry. This was mostly due to a decrease in the portfolio of government securities, which had grown significantly in FY23. As a result, DFIs’ after-tax income dropped from Rs21 billion in FY23 to Rs13.2 billion, a 37% decrease.

The rate of asset base growth for Microfinance Banks (MFBs) slowed to 8.6% in FY24 from 19.3% in FY23. Compared to banks and DFIs, MFBs have a more challenging operating environment, as seen by the slower growth rates of advances and investments.

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