Editorial
Pakistan’s economy remains heavily reliant on cash transactions, with a large portion of economic activity taking place in the informal sector. This cash dependency has hindered the growth of micro, small, and medium-sized enterprises (SMEs), limiting their access to formal financial services such as loans, savings, and insurance. A significant 64% of Pakistan’s economy operates informally, driven by cash-based transactions that result in inconsistent financial reporting and prevent businesses from accessing essential services, stalling their potential for growth.
One of the key obstacles to financial inclusion is the limited effectiveness of monetary policy due to the high currency in circulation (CIC) and the lack of formal financial channels. With over 80% of transactions in the retail and wholesale sectors being cash-based, businesses struggle to access credit and other financial services, impeding sustainable growth. Moreover, this reliance on cash constrains the government’s ability to generate bank deposits, stalling economic activity and tax collection.
RAAST, Pakistan’s real-time payment system, offers a potential solution to these challenges with its Person-to-Merchant (P2M) Retailer Payment module. This system enables instant, low-cost payments, offering micro and small businesses the opportunity to integrate into the formal financial ecosystem. By promoting digital payments with minimal or no transaction fees, RAAST addresses barriers that discourage adoption by merchants with thin profit margins. Instant settlement further benefits businesses, providing immediate access to funds crucial for daily operations.
RAAST’s potential to drive financial inclusion is underscored by its alignment with global trends, such as India’s Unified Payments Interface (UPI) and Brazil’s PIX system, which have transformed the financial landscapes of their respective countries. However, for RAAST to succeed, Pakistan must invest in internet infrastructure, financial education, and consumer awareness campaigns to encourage adoption, particularly in rural areas. By gradually shifting from cash to digital payments, Pakistan can unlock new opportunities for SMEs, enhancing financial resilience and fostering long-term economic growth.
