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Innovative banking products

By Mohiuddin Aazim 2016-02-29
THE use of financial technology fintech is fast becorning visible across the spectrurn of all banking products butnotably for handling of home remittances.

`As the central bank keeps pushing us to mobilise more remittances from overseas Pakistanis and as growth rate of remittances has started slowing down, fintech is keeping us on track in our task,` says a senior executive of National Bank of Pakistan.

Banks, equipped with IT solutions of various procedural issues now claim that they deliver the remittances sent home by overseas Pakistanis to their beneficiaries here in less than 24 hours.

Central bankers say that banks must focus now on development of long-term financing and investment products as well as green banking products.

Banks need more products to handle the demand that is expected to come up as work on CPECrelated mega infrastructural and energy projects start. And, they also need to develop the kind of needed products in anticipation of faster industrial growth in coming years.

In the past few years, banks have come up with new financial products to cater to the changing needs of their clients and to build their strengths for promoting their businesses. However, it is a continuing process in a diversifying economy.

Many aspects of the new banking products merit discussion, but a couple of things stand out.

First, both conventional as well as Islamic banks have frequently introduced Islamic banking products in response to rising demand for Shariahcompliant banking.

Second, Islamic and conventional banks have a number of products to serve their clients better in inland and overseas fund transfers, e-payments, online hedging of commodities and business-tobusiness (B2B) payments flow management in a diversifying economy.

A third aspect of product development is that some of them are designed for a fast-expanding consumer class or leastdocumented small businesses. Or they help large commercial and corporate clients in overnight borrowing and cash parking with least hassle.

Phenomenal growth in Islamic banking has encouraged banks to develop Shariah-compliant products for deposit mobilisation, lending, liquidity management of companies, mortgage finance and corporate and consumer leasing and insurance.

Islamic banking has diversified their product-baseto tap the growing demand. `That`s why you see mortgage finance and leasing being somewhat dominated by Shariah-compliant banking products,` says a senior executive of Meezan Bank.

To promote branchless banking, financial services products like Omni and Easypaisa have gained some foothold while, similar products with different names like U-Paisa have also hit the market. And, online and internet banking with SMS alerts are fast gaining currency as they are wellsuited to busier life and changing business styles of individuals and companies. MCB Lite is and Dubai Islamic bank`s e-savings are just two examples.

More importantly, banks are now promoting such well-packaged current and saving accounts wherein the clients are not only able to deposit and withdraw money on daily basis but also get monthly returns. In addition, they also get insurance cover and a host of so-called free facilities including pay-drafts etc whose cost is actually built-in in the rates of return on the total amount borrowed in a certain period.

Askari Bank`s Asan account and HBL`s Mahfooz Karobar are two examples of many in this class.

`But now you can see some of them, particularly microfinance banks doing well and their financialproducts are not only helping them grow but also contributing towards financial inclusion,` says a senior executive of Waseela microfinance bank.

Mobicash of Waseela and Tameer Makan of Tameer Bank are just two examples of how the lower strata of population can be helped with cash loans and small housing loans and, in turn, more of the unbanked people can be attracted to formal banking.

In addition to microfinance, increased agricultural loaning by commercial banks is also indirectly contributing to financial inclusion particularly in cases where loans are advanced to SMEs in agro-based industries.

In this area, too, banks have introduced in recent years new products with additional features to attract borrowers. State-run National Bank, for example, claims to provide on-field guidance to borrowers who seek funds through its Kissan dost scheme.

And, bank Alfalah has stepped up its agricultural lending by revamping its entire agri-loan product base. Executives of the bank say now they have about a dozen agri-loan schemes, under the umbrella of Zarai Sahulat , each one designed to meet specific needs of a particular sub-sector of agriculture. •