Karachi: Deputy Governor of the State Bank of Pakistan, Saleemullah, announced that the State Bank is working on introducing a digital currency and has sought technical assistance from the IMF and World Bank for this purpose.
Speaking at the Digital Supply Chain Finance Conference and in a media talk on Monday, he revealed that the State Bank is connecting with 60 countries, including those in the Middle East, to enhance remittance services.
By next year, the system will be linked to the Arab Monetary Fund’s cross-border payment system, “Buna,” which will enable the 60 million Pakistanis abroad to transfer funds quickly and cost-effectively.
He noted that overseas Pakistanis receive remittances free of charge through the banking system, with the government covering the costs.
However, private banks are not financing SMEs adequately, with only 4% of loans going to this sector, a situation he described as a failure of the State Bank.
He highlighted that SMEs are crucial to the economy, contributing 40% to GDP, 24% to exports, and 80% to job creation.
The State Bank has been unsuccessful in creating a supportive and dynamic financial system for SMEs and has urged the government to amend laws and introduce credit coverage for SMEs.
Sherman also addressed the need for banks to invest their profits into business growth, moving away from a subsidy culture towards real commercial foundations.
He announced that starting July 1, the government will support loans to SMEs, and the use of technology could reduce banking costs.
Additionally, Deputy Governor Sherman introduced a Challenge Fund to promote new methods for SME financing, expecting digital banks to boost SME finance and inject 2 trillion rupees into the banking system over the next five years.
Chairman of the Pakistan Banks Association, Zafar Masood, emphasized the need for a central data exchange to promote digital banking and payments.
He suggested creating a data exchange from information held by NADRA, telecom companies, banks, and power utilities, which could improve digital financing and reduce costs.
Masood noted that banks fulfill 93% of the government’s financing needs, with half of the funds coming from depositors and the rest from State Bank loans.
As tax revenue increases, the demand for government borrowing is expected to decrease.
He also mentioned that with the increasing number of smartphones and mobile wallets in Pakistan, there is significant potential to advance digital supply chain financing.