The poor in Pakistan rely on informal credit facilities to bridge the gap between consumption and expenses. Usually this form of credit is given by loan sharks who charge an exorbitant interest rate. Besides this, Pakistan is also heavily under banked, where majority of the population does not have access to the formal banking channels.
As mobile penetration has increased in the country, which is estimated around 100 million, it provides as opportunity to bring the unbanked into the formal banking sector. Mobile penetration also gives access to the poor and the vulnerable poor to credit facilities and mobile wallets. Microfinance banks and the telecom providers are all getting into the mobile wallet space, which is a virtual bank account linked to your telephone number. Enabling individuals to conduct transactions through the mobile device.
Development of mobile wallets, has enabled a shift towards providing nano or microloans through mobile technology at the click of a button. Loans can be provided to those outside of the formal banking sector with no credit scores at the touch of a button. Through machine-learning algorithms and artificial intelligence, lending institutes are able to assess credit worthiness of the poor and their ability to payback micro or nano loans.
These online platforms can also be used for insurance products to safeguard the poor against catastrophic shocks.