Daily Times

Top representatives from the banking and fintech sectors along with state regulators gathered to discuss ways and suggest implementable solutions to digital based financing for supply chains for small and medium enterprises and the agriculture sectors at the 5th DigiBAP Summit 2024 on Monday at a local hotel. The summit featured panel discussions and presentations by leading bank presidents and CEOs as well as senior executives on issues such as Financing the Future, Digital SME Lending, Strategies for Digital Supply Chain Financing, and Future of Digital Lending.

Speaking as chief guest at the 5th DigiBap Summit 2024, Deputy Governor, State Bank of Pakistan (SBP), Saleem Ullah said that ease in access to finance for the SME sector is the priority area for the government and all banks need to create the requisite infrastructure and systems to extending digital financing solutions for supply chains of SMEs. He lamented that currently less than 5% commercial funding is extended to the crucial SME sector. The summit was organized and hosted by Terrabiz in collaboration with Dukan.

SBP’s 5-year strategic plan calls for doubling the size of credit to SMEs to Rs. 1,100 billion and increasing the borrowers 150,000 small businesses. For this we need to accept SMEs as a profitable business segment. Saleem Ullah asked banks to develop their working plans for this end and share those plans with SBP. SME along with Agriculture and IT remain priority sectors and the PBA has made task forces on this. These sectors require concrete measures on real commercial lines and not just lip service or subsidies.

The Deputy Governor also said that banks need to properly leverage technology to meet targets, reduce bank costs, and increase access. We have global examples for this including some in Pakistan as well. SBP has extended a challenge fund to start-ups for SME and DSC financing and good options had emerged. He stressed the need to improve on synergies to reduce cash circulation, digital payments, digital banking and the overall digital banking eco-system. Raast with 37 million digital accounts and Rs. 15 trillion in transactions has been a game changer in digital banking.

Chairman Pakistan Banks’ Association Zafar Masud, said increasing digital adoption is dismantling barriers to financial inclusion in Pakistan, engaging people in the formal financial system, aiding in the drive of economic growth, and posing an opportunity for Digital Supply Chain Finance (or DSCF) to streamline and enhance financial transactions within supply chains and offer substantial benefits to SMEs.

He mentioned that the banking regulator mandated banks to develop and implement DSCF solutions within six months to address the need to increase SMEs’ access to finance and digitize payments. In this regard, partnerships between banks, fintechs, and other technology providers can expedite the rollout of digital SCF offerings, making them accessible to SMEs relatively quickly. Finance Minister Muhammad Aurangzeb also mandated the Pakistan Banks’ Association (PBA) to work with SBP on enhancing financial inclusion in agriculture and SMEs, particularly in the area of technology and leveraging existing digital platforms, he added.

Zafar Masud pointed out that Pakistan stands at a unique crossroads with substantial opportunities and challenges in enhancing digital supply chain financing and SME growth. A multifaceted approach combining regulatory support, technological adoption, cybersecurity hygiene and awareness, and strategic partnerships is essential to enhance digital supply chain finance and SME growth in Pakistan, he further said.

Responding to audience queries, Saleem Ullah and Zafar Masud said that start-ups will be facilitated through a private equity fund. Normally banks do not have the requisite infrastructure and public money at commercial banks have to be risk protected. However, banks should also increase their risk appetite. Saleem Ullah also said that cash flow-based lending instead of collateral based lending is also being encouraged. He also stressed on consumer data protection by open and digital banks. Zafar Masud said that a slow psychological shift is coming in the banking sector to create ease of access to credit.

Aamir Aftab, Chief Product Officer at JazzCash, said, “Pakistan is home to approximately 3 million small, and medium enterprises (SMEs), and JazzCash aims to digitise its transactions. The platform processes over 100,000 loans daily, providing a crucial financial tool for MSMEs, which are the backbone of Pakistan’s economy but have historically had limited access to formal financial sources,” said Aamir Aftab. “With policy interventions that incentivize digital payments, we can accelerate the adoption of digital financial services. JazzCash’s extensive network allows it to digitise over PKR 100 billion each month, serving a customer base of 44 million.”

Organizer of the summit and CEO Terrabiz, Hamza Wasi Hashmi said the digitization of the economy is a matter of paramount importance for the government and the private sector in order to achieve maximum financial inclusion and documentation of the economy. He further stated that the digital supply chain finance solution is a game-changer for Pakistan’s economy.

The summit featured a major panel discussion participated by President NBP, Rehmat Hasnie; President HBL, Nassir Salim; Deputy CEO Meezan Bank, Syed Amir Ali; CEO of HBL Microfinance Bank, Muhammad Amir Khan; and Hamayun Sajjad, CEO Mashreq Bank, on Financing the Future: MSMEs, Agriculture and Digital Transformation, and discussed issues like expanding ease of access to financing, state collaboration, and efforts to enhance innovation and efficiency.

Monis Rehman of Dukan, the summit partner, also conducted a workshop on SME financing, co-facilitated by Dr. Imran Usmani, Vice Chairman Shariah Board of Meezan Bank and Khurram Warraich, Group Head Digital Lending from Telenor Microfinance Bank.

Other speakers included Atif Malik, COO of JS Bank who also heads the PBA Task Force on SME Digital Financing Solutions.