Embracing innovation, fostering financial inclusion, and advancing SME lending are critical to boosting the efficiency and competitiveness of Pakistan’s banking sector, according to a new analysis by the Center for Economic Research in Pakistan (CERP) and Alchemy Technologies. Supported by the Pakistan Banks’ Association (PBA), the report, titled “Banking on our Banks: Aligning Growth with Development,” was launched at an event in Karachi on Thursday.
Addressing Challenges in Pakistan’s Banking Sector
Industry leaders, regulators, and financial experts convened at the launch event to discuss the vital role of Pakistan’s banking sector in driving economic growth and development. The report sheds light on key challenges faced by the sector, including performance disparity with regional peers, over-reliance on certain economic sectors, and regulatory hurdles that discourage innovation and the adoption of formal banking channels.
State Bank of Pakistan (SBP) Governor Jameel Ahmad, the event’s chief guest, emphasized the sector’s potential:
“Our banking sector is well-positioned in terms of solvency, asset quality, and profitability to contribute to Pakistan’s economic growth by embracing technology and fostering innovation. By focusing on governance and risk management, we can enhance the sector’s capacity to serve all segments of the economy.”
The Need for Incentives and Structural Reforms
Zafar Masud, Chairman of PBA, highlighted the challenges posed by Pakistan’s undocumented economy, which constitutes 52% of economic activity. Despite this, the banking sector continues to contribute significantly to the national exchequer. However, Masud noted that banks often focus on well-trodden lending paths, prioritizing sectors like energy, agriculture, and textiles, while neglecting industries with long-term potential.
Maroof A. Syed, CEO of CERP, argued that incentives, not just regulatory changes, are crucial to driving meaningful change:
“Changing rules doesn’t change behavior—incentives do. With the right data and solutions, we can build a unified banking ecosystem ready to fuel Pakistan’s economic recovery.”
Panelists at the event included financial experts and industry leaders such as Maheen Rahman (CEO, InfraZamin Pakistan) and Ahmed Khan Bozai (Vice Chairman, PBA), debated the findings of the report. Discussions focused on:
- Regulatory challenges and high digitalization costs.
- The need for market-driven incentives and a sandbox approach to experimentation.
- The importance of diversifying lending strategies to support small businesses and emerging industries.
Jawwad Farid, CEO of Alchemy Technologies, stressed the need for bold decision-making:
“Without forward-looking boards and robust frameworks, banks will continue prioritizing comfort lending over the transformative decisions necessary for economic growth.”
A Collaborative Way Forward
The event concluded with Muneer Kamal, CEO and Secretary General of PBA, expressing gratitude to CERP and Alchemy Technologies for initiating this critical dialogue. Kamal reaffirmed the banking sector’s commitment to stimulating economic activity and emphasized ongoing collaborations with the Ministry of Finance and SBP to drive long-term reforms.
The report calls for a unified strategy that aligns banking growth with national development, urging banks to adopt innovative approaches, embrace diversity in leadership, and support reforms aimed at enhancing financial inclusion and reducing the costs of doing business.
By fostering collaboration between regulators, banks, and other stakeholders, Pakistan’s banking sector has the potential to evolve into a robust engine for economic growth, creating a resilient and inclusive financial ecosystem capable of withstanding global challenges.
