Banking sector well-positioned to drive economic development: SBP

KARACHI: State Bank of Pakistan Governor Jameel Ahmad has said that the banking sector is well positioned with regard to solvency, asset quality and profitability to support the country’s economic growth and development, a statement said.

The SBP governor made this statement at the launch of an analysis titled ‘Banking on our Banks: Aligning Growth with Development’ that was conducted by CERP and Alchemy Technologies with support from the Pakistan Banks’ Association (PBA). The event was held on Wednesday.

“Our banking sector is well positioned in terms of solvency, asset quality and profitability to contribute to the economic growth and development of Pakistan by embracing technology and fostering innovation. While remaining focused on governance and risk management, we can enhance the capacity and resilience of our banking sector to serve all segments of the economy,” Ahmad said.

Chairman of the PBA Zafar Masud said it is important to recognise that Pakistan’s banks operate in a challenging environment, with 52 per cent of the undocumented economy and many sectors actively avoiding the tax net.

“Despite these challenges, the banking sector continues to contribute generously to the national exchequer and fiscal deficit, with a willingness to do even more through income-based taxes than the taxes on balance sheet like the ADR,” Masud said.

“This level of commitment is rare, especially in emerging economies like ours, and deserves recognition and applause,” he added.The analysis suggests that the key to increasing the effectiveness of Pakistan’s banks is innovation, financial inclusion, lending to SMEs, and progressive banking regulations.

“The truth is that changing rules doesn’t change behaviour, incentives do. With the right data and solutions, we can build a unified banking ecosystem ready to fuel Pakistan’s economic recovery,” said Maroof A Syed, president and CEO of CERP.

The event also included panel discussions, which highlighted regulatory challenges, the high costs associated with digitalisation and the resulting overreliance on unprofitable sectors. However, with well-implemented and strategic reforms, these issues can be addressed, reducing frictional costs and enhancing banks’ long-term competitiveness.

“We need market-driven incentives, robust regulatory frameworks, forward-looking boards and a sandbox approach to experimentation. Otherwise, banks will continue to prioritise comfort lending over bold decisions necessary for economic transformation,” said Jawwad Farid, CEO at Alchemy Technologies and Professor of Practice at IBA.