ISLAMABAD - Despite significant growth of Pakistans financial system, access to finance remains elusive for most Pakistanis, especially poor people, women, and small businesses in rural areas, says a new World Bank report launched here on Tuesday. The report, titled Bringing Finance to Pakistans Poor: A Study on Access to Finance for the Underserved and Small Enterprises says the average Pakistani household remains outside the formal financial system, saving at home and borrowing from family or friends in cases of dire need. In fact, only 14 per cent of adults have access to a formal financial institution and about 40 per cent have no financial access to formal or informal financial systems, the report highlighted. Policy efforts to increase access to finance in Pakistan have taken time to bear fruit, the report says, but now access is expanding quickly in certain financial sectors such as micro-finance and remittances 3/4 albeit from a very low base. The report says the major constraints to financial access arise from high levels of poverty, combined with low awareness of and information about available financial services, as well as gender bias. In addition, financial institutions efforts to expand access have been discouraged by slow technological advances, weak legal foundations, and unsuitable financial processes, and products. Despite significant banking sector reforms and efforts to expand financial market coverage over the past few years, outreach has lagged behind the countrys growth and development needs, said Yusupha B Crookes, World Bank Country Director for Pakistan. The Bank country head said, This report demonstrates that there is an enormous growth potential for financial services in Pakistan, especially in rural areas. Around one-third of the population borrows, but only three per cent use formal services to do so. The report says the formal financial sector could learn from and cooperate with informal arrangements to increase coverage. Financial services provided by the informal sector are perceived as being more geographically accessible, less complex, with fewer requirements, and easier to understand. For one, formal financial institutions could differentiate their products more, attuning them to the specific needs of various population segments, such as women. Micro and small enterprises have seen a worsening of access to finance, while medium-size enterprises have seen improvements, the report says. Enterprises do not seem to be excluded from financial markets due to poor performance. Instead, an incomplete legal and regulatory framework and non-SME-friendly products and procedures hamper increased SME lending. Indirect costs - legal fees, collateral registration, and documentation make bank lending expensive for Small and Medium Enterprises (SMEs). If appropriately supported, SMEs have the potential to be the growth engines of the economy due to their ability to create jobs, foster entrepreneurship, and to provide depth to the industrial base of the economy, said Tatiana Nenova, World Bank Senior Economist and lead author of the report. However, SMEs get a disproportionately small share of credit relative to their economic importance. In fact, SME lending accounts for only 16 per cent of total lending volume. Aggressive promotion of an enabling environment for SME lending is vital to reverse this trend. The report says Pakistans microfinance sector has considerable growth potential. The formal microfinance sector reaches less than 2 per cent of the poor, as opposed to over a quarter in Bangladesh, India, and Sri Lanka. Remittance flows can play a valuable role in providing foreign exchange, but more importantly also offer significant potential to support incomes of poor and vulnerable groups, the report says. International remittance inflows were at US$5.7 billion over the period of July 2008 to March 2009. In Pakistan, however, formal remittances have not been a major part of income for poorer households, and have not reached the poor, women, and rural areas, where service is mostly informal. The State Bank of Pakistan (SBP) has taken various measures that have significantly increased remittances through formal channels, though a large share of domestic remittances remains informally transferred. The report also cites that the effective response to issues around financial inclusion requires a joint effort of SBP, the financial institutions, the national government, private sector, the community, and donors. A rapid scaling-up of access could be accomplished by relying on technology, literacy gains, financial re-engineering of processes and products, and an enabling legal and institutional framework. APP adds: Advisor to the Prime Minister on Finance Shaukat Tarin has said the Federal Budget for the financial year 2009-10 is scheduled to be announced on June 6, or June 13. He was talking to the media persons after attending the dissemination ceremony of World Bank report here at a local hotel on Tuesday. Mr Tarin said that govt would not allow the export of wheat as Pakistan and its people suffered a lot in the past due to this decision as the country faced shortage of the commodity. However, he said that govt would allow only the export of wheat products to Afghanistan.