Pakistan has over 800,000 small retailers across the country, with ‘kiryana' stores, general stores, and kiosks all falling into this cohort. Most of these businesses shy away from traditional banking channels due to a variety of challenges, including lack of awareness, extensive documentation requirements for account opening and general unwillingness, amongst others.

This results in operational inconvenience and high associated costs of doing business as most merchants are then forced to deal entirely in cash. In fact, for a distributor this spells out expenses of up to 2% of their annual revenues on average. Merchants themselves complain of numerous hassles that accompany cash dealing and the high vulnerability to financial troubles caused by any sales deficit.

Contrary to popular belief that typecasts smaller retails as technology averse, merchants often actively seek windows that enable them to shift towards digital payments. The preference is such that even a small discount is enough to motivate them towards a switch from cash to online transactions. While allowing a monumental leapfrog towards payment chain digitization, this is also a healthy prospect for the Pakistani economy, especially when a majority of businesses remain undocumented with their revenues not reflected in the overall standings.

Driven by statistics which reveal that an alarming chunk of Pakistan's population is unbanked and has little to no access to financial services, the United Nations pledged to address this challenge at the grass root level in 2018. One of the biggest successes that have resulted from this agenda is an alliance, titled ‘CEO Partnership for Economic Inclusion' which has brought together some of the biggest corporate players in the country, to accelerate financial inclusion in Pakistan and other countries around the world that face similar issues.

The CEO Partnership has sparked an innovative collaboration between Pakistan's leading mobile banking and digital payments provider Easypaisa and Unilever Pakistan, with the companies partnering as enablers for digital and financial inclusion in Pakistan through mainstream access to digitalized retail services, digital financial solutions, digital products and skill enhancement. The initiative allows distributors and merchants to eliminate cash from the operational cycles, reduce costs of doing business while increasing ease to operate. This is also helping lower risks of theft and cash leakage for both parties.

Based on the success of the results from the initial days of the initiative, the merchant-to-distributor project, or M2D as it is commonly known, now stands to expand in three phases. The first phase includes establishing digital payment platforms between retailers and distributors, followed by capacity development to accept and use Easypaisa payments from consumers and then finally enhancing merchants' access to financing from Telenor Microfinance Bank. The merchants and distributors who are part of the existing partnership are part of Unilever Pakistan's widespread national distribution network. The implementation for the project has begun on a small scale with a pool of 270 merchants in Karachi. The results have been astonishing to say the least with 1,400 transactions being processed carrying a collective worth of almost 7 million rupees.

Pakistan's financial inclusion percentage grew from 9% to 14% in 2017, a number which is still dismal in comparison to other economies in the region, and far behind that of more developed economies in Europe and North America. While this negatively impacts our outlook as a developing nation and translates into monetary difficulties for general consumers and small businesses, the use of digital solutions stands to change this. Testament to the user acceptance of digital solutions is the fact that Easypaisa Merchant to Distributor payments segment has seen an astonishing growth in year 2019 where almost 3 Billion Rupees have been moved through 70,000 Transactions.

Telenor Microfinance Bank, through Easypaisa, and Unilever Pakistan, with its unique reach and footprint in the country as one of the biggest FMCG companies, are taking a positive step to address ground realities. This is especially welcome given the local law and order situations, as well as economic instability currently being faced by the country. While people are afraid to explore traditional banking channels due to the stringent credit scoring, heavy documentation relatively limited credit options for small mom-and-pop stores or other similar businesses, microfinance can change things radically.

The Partnership which is still in its early days, is already making inroads into expanding economic inclusion to the masses in different countries. There are challenges from both distributors and merchants which need to be overcome through continuous efforts. The collaboration also creates an opportunity for small and medium retailers to obtain financing during times of need.

Unilever is aiming to add more distributors in the pool while also encouraging other companies to contribute and participate in this potential industry disruption. It seems like the future holds great progress and development for financial inclusion in the country and the Easypaisa-Unilever partnership is a milestone in the same direction.

Official quotes by Companies in the article: President & CEO, Telenor Microfinance Bank, Mohommad Mudassar Aqil:

“Almost three quarters of the Pakistani population lives without access to banking or any kind of documented financial services and even today, Pakistan's retail landscape is based almost entirely on cash payments. We at Telenor Microfinance Bank believe that the dream of digitizing payments cannot come true until we focus on completing the digital payments value chain from the consumer till the manufacturer. With Unilever, a prominent FMCG player in Pakistan, we are committed to leveraging our respective strategic strengths and digitizing the payments between their merchants and their distributors and then extending these digital payments to consumers. We aim to not only digitize the conventional retail ecosystem but also transform small and medium merchant's access to financial capital. This cooperation will be phenomenal for the quick adoption of innovative financial technologies and a faster shift towards digitally and economically enabled Pakistan."

CEO, Unilever Pakistan Ltd., Shazia Syed:

“It is imperative for the corporate sector to leverage digital technology to enable disruptions that contribute towards the growth of the retail industry. By joining hands with Telenor Microfinance Bank, we are working towards our shared ambition of a transparent, technologically enabled and fully digitised value chain that reduces merchants' barriers to financial services. Together, we intend to use our reach and influence to financially include small and medium retail businesses and help them expand their scale."

Points for Clarity: 1. Please confirm what is Expanding Horizons in Merchant-Distribution Transactions – is it between the distribution channels of Unilever through Easypaisa, or the retailer using Easypaisa for sales with consumers?

The title of the article refers to a digitized process of making payments between distributor and the merchants through Easypaisa. It is between the distribution channels of Unilever. For instance, a merchant wants to make his monthly payment to the distributor. The distributor's salesman gives the merchant his unique Til number or shows a QR code to scan. The merchant pays via his Easypaisa mobile account, app or with the USSD *786# using the distributors Til number. Funds are deducted from the merchant's account and deposited to the retailer. Both receive a confirmation message as a digital receipt of the transaction.

Graphical representation is as follows:

2. What is the next target of Easypaisa or Unilever in this regard?

The project is still only operational with selected distributors in Karachi, Easypaisa and Unilever aim to expand to other cities. Additionally, the service offerings will also be expanded by including credit options like lending for smaller merchants. The service will also be expanded to enable digital payments between consumers and merchants.

3. How is this linked to Queen Maxima and her visit?

This project with Unilever is the part of CEOs Partnership program of UNSGSA (Headed by Queen Maxima), which aims to promote financial inclusion in developing countries.

4. Please confirm the timeframe of the figures given in the article. Are these from 2019 or some other period?

All the figures are updated and from 2019.

Copyright Business Recorder, 2019