RAWALPINDI The concept of committees is widely understood by nearly 90 per cent of the population in Pakistan, and this informal money-lending method ranks the third savings channel in the country.
 
Committees are also third most popular borrowing channel, behind shopkeeper loans and family and friends. Studies suggest a large number of Pakistanis are involved in such group schemes, says a new World Bank study on 'Finance for the Underserved and Small Enterprises.'
 
According to the study, ballot committees are much more frequently used than other committees with 87 per cent of committee users.
 
Deliberating further on the concept of committees, the World Bank study says committees are not used significantly more by women (14 per cent) than men (14.5 per cent). They do not cater to other under-served groups such as farmers and labourers. Finally, committees are used more than twice as much in urban areas in rural areas, particularly in Punjab and Sindh. Their use also increases with income, points out the study.
 
Women and residents of urban areas are significantly more likely to participate in committees. The incidence of committee participation is also found to increase with education levels and decrease with age. While being employed in the formal or informal sector has a positive incidence on using committees, the professional profile effect on the likelihood of committee participation reinforces their urban nature. Committee participants are more likely to be formal corporate workers.
 
Over 84 per cent of users participate in only one committee. Contributions to committees are made monthly. Change in income has the highest impact on changes in payments to committees, with the exception of Balochistan where family reasons have the highest impact on amounts paid to committees.
 
While perceptions are very positive, and involve trust, good service, and ease of use, women have an even better perception of committees than the average individual, the study says.
 
Among the financial products, the World Bank study says, savings and investments, by far the most popular, are used by two-thirds of the population followed by loans and credits, used by one-third. Among those who save, savings are mostly done informally - only 14.9 per cent of savers go to informal financial institutions, study estimates.
 
About 63.6 per cent of savers save at home. Committees are the second most popular informal saving channels for savers, as much among women as men. Saving with family and friends is done equally among rural and urban areas, across income groups. Three-quarters of formal savers were also saving informally.
 
While women's attitude towards financial services suggest higher savings motives than men, women are excluded from access to most savings channels; all characteristics held constant, women are found less likely than men to be savings account holders. Women are found to be more likely than men to use informal savings channels than nor save at all, study says.
 
Only a small share of the saving volume is captured in the commercial banking sector. The most popular savings product, the PLS/Savings account, is used by only 11.2 per cent of savers. The penetration of post office savings is appreciably less than that of post office remittance products.
 
Despite its presence throughout Pakistan and its existing remittance customer base, the Pakistan Post Bank may not be leveraging its relative proximity in some provinces to diversify further into banking and saving products.
 
Post offices and Stage Life Insurance are the most-used nonblank formal financial institutions for saving, used by 0.7 per cent and 0.6 per cent respectively, of those who save, although well behind the banks. Micro-finance savings (0.2 per cent) and Islamic savings (0.1 per cent) represent minor saving channels, study says.
 
Within the formal sector, government savings like provident funds, pensions funds, prize bonds, and government savings certificate, and private savings (PLS/saving account, post office savings account, microfinance, Islamic savings, and shares) products are the most popular with over 11 per cent people using them.