Key statistics:
Pakistan is the world's fifth most populous country (over 220 million) and is one of the world’s most vulnerable countries to climate change. And yet, with more than 180 million “emerging consumers”, the country’s insurance penetration rate is still significantly lower than in many comparable developing economies. However, with an emerging semi-industrial economy, a growing middle class and strong commitment from the public and private sectors to create a more inclusive environment for insurance, there is significant growth potential for this nascent insurance market.
Although Pakistan continues to face significant issues relating to social unrest, illiteracy, corruption, and domestic and regional tensions, it has important strategic characteristics and development potential – including the increasing proportion of its youth (half of the population is aged under 23 compared with the global median age of 31) providing the country with potential demographic benefits. There are, however, also challenges relating to the provision of adequate social protection and employment against a backdrop of low per capita income, high poverty levels and gender discrimination.
Addressing the socio-economic challenges
Classified as a lower-middle income country and after a contraction in 2020 due to the impact of the global pandemic, Pakistan’s economy showed signs of recovery in 2021 but imbalances have widened and risk levels remain heightened. In February 2022, the International Monetary Fund approved a USD 1 billion disbursement to Pakistan after completing a further review of the country's reforms under a USD 6 billion bailout programme.
Pakistan's GDP is expected to grow slightly this year but its economy remains vulnerable to flare-ups of COVID-19, tighter international financial conditions, a rise in geopolitical tensions and delayed implementation of structural reforms.
Approximately two-thirds of the total population are of working age with almost three-quarters of these informally employed and facing challenges related to labour rights, child labour, social protection, poverty and gender-based discrimination.
There are three main sectors of the economy: the services sector which includes tourism, financial services and telecommunications; agriculture, fishing and mining; and manufacturing. The services sector drives the economy, accounts for almost two-thirds of GDP and employs over one-third of the workforce. Agriculture is a key sector with 65% of the population depending on it for their livelihoods. It employs the largest share of the working population (39.2%) and contributes over one-fifth of GDP. The agricultural sector faces challenges related to climate change, lack of water and labour migration which prevent it from contributing more to the GDP and reaching its true potential.
Strengthening resilience
Pakistan is one of the most vulnerable countries to climate change due to the impact of events such as floods, droughts, landslides, and sea storms or cyclones. The government has set up a number of different initiatives to mitigate these risks in addition to which, the World Bank approved a USD 300m financing programme in 2020 to help strengthen Pakistan’s resilience, particularly in the face of natural disasters and health emergencies.
In 2015, the Government launched the “Sehat Sahulat Programme”, a national health insurance initiative, to improve access to good quality medical services for the poor and reduce poverty, with the aim of achieving universal health coverage. The programme provides free in-patient healthcare services to poor families, with premiums fully subsidised by the government.
In 2019, the government also launched a social protection and poverty eradication initiative (“Ehsaas”) which is a multi-sectoral programme. Many programmes have already been implemented including, for example, emergency cash assistance being provided to almost 15 million people at risk of extreme poverty due to the COVID-19 crisis.
Inclusive insurance market developments
The financial inclusion rate among adults stands at 21% in Pakistan, which is far behind other countries with the same socio-economic profile – and there is a large gender gap between men (36%) and women (7%). A National Financial Inclusion Strategy (NFIS) was launched in 2015 with the aim by 2023 of increasing usage of digital payments; enhancing the deposit base to 55% of GDP; promoting SME finance; increasing agricultural finance; and developing the share of Islamic banking.
Pakistan is one of 21 countries selected by the Insurance Development Forum’s Inclusive Insurance Working Group (IIWG) which is coordinated by the Microinsurance Network. The IIWG aims to contribute to the inclusive growth of emerging economies and to the resilience of their vulnerable communities by driving and enhancing coordination and collaboration on inclusive insurance projects and maximising their impact and efficiency - both in terms of technical assistance and funding.
In February 2022, in partnership with the Pakistan Microfinance Network (PMN) and with the support of the Securities and Exchange Commission of Pakistan (which regulates the insurance market), the Microinsurance Network held a workshop “Moving the Needle: Making Microinsurance More Inclusive”. Representatives from across the insurance industry discussed the results of the 2021 Landscape of Microinsurance Study and the opportunities and barriers for developing inclusive insurance in Pakistan – including building financial literacy through education programmes and training to tackle the low rate of financial inclusion and gaps in literacy which are limiting the development of microinsurance in Pakistan.
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