SBP chief urges banks to shift from govt lending to private-sector credit, unveils roadmap for reforms

KARACHI: The Governor of the State Bank of Pakistan (SBP), Jameel Ahmad, offering a blueprint for the futuristic transformation of the banking system driven by innovation, inclusion and responsibility, on Friday stressed the need for banks to reorient business models to serve the private sector, especially SMEs and small depositors.

He was addressing the 10th Pakistan Banking Awards ceremony for promoting excellence, innovation and integrity in the banking sector, said a statement issued here.

The SBP governor, in his address, noted the important role of these awards in helping raise banking standards in the country and, in this context, offered a blueprint for the transformation required in the banking system over the next decade, driven by innovation, inclusion and responsibility.

This transformation would not be possible unless banks reorient their business models towards serving the financial needs of the private sector, especially SMEs and small depositors, he observed, adding: “Banks that continue to rely on easy returns from lending to the government will eventually be left behind by institutions that are mobilising deposits and meeting the growing credit needs of underserved segments.”

Elaborating on the way forward, the SBP governor encouraged banks to focus on four main areas, such as digitalisation, utilisation of AI and tailor-made financial products, integration of climate risk, and realignment of business models.

He asked banks to embed digitalisation into everyday customer experiences and their own business operations, including mobile commerce, agriculture supply chains, credit scoring and risk management. 

Second, he said banks should adopt artificial intelligence and machine learning tools to build smarter risk models incorporating alternative data furnished by AI, and design tailor-made financial products for small firms, start-ups and entrepreneurs who lack conventional documentation.

Jameel Ahmad also underscored the need to integrate climate risk into banks’ credit decisions, set clear sustainability targets, and develop green bonds and sustainability-linked loans for climate financing. Finally, he urged banks to reassess their priorities and strategically realign their business models to better facilitate and strengthen Pakistan’s exporters.