5th DigiBAP Summit 2024: Collaborative Efforts Urged to Boost Digital Based Financing

Staff Report: Top representatives from the banking and fintech sectors, along with state regulators, gathered to discuss ways to enhance digital-based financing for supply chains for small and medium enterprises (SMEs) 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, CEOs, and senior executives on topics such as Financing the Future, Digital SME Lending, Strategies for Digital Supply Chain Financing, and the Future of Digital Lending.

Speaking as chief guest at the 5th DigiBAP Summit 2024, Deputy Governor of the State Bank of Pakistan (SBP), Saleem Ullah, emphasized that easing access to finance for the SME sector is a priority for the government. He urged all banks to create the necessary infrastructure and systems to extend digital financing solutions for SME supply chains. He lamented that currently, less than 5% of 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 aims to double the size of credit to SMEs to Rs. 1,100 billion and increase the number of SME borrowers to 150,000. Saleem Ullah asked banks to develop and share their working plans with SBP to achieve this goal. He also highlighted that SME, along with agriculture and IT, remain priority sectors, and the Pakistan Banks’ Association (PBA) has created task forces for these areas. He stressed the need for concrete measures on real commercial lines, rather than mere lip service or subsidies.

The Deputy Governor also mentioned that banks need to leverage technology to meet targets, reduce costs, and increase access. He cited global examples and noted that SBP has extended a challenge fund to start-ups for SME and digital supply chain (DSC) financing, which has yielded promising options. He stressed the need for improved synergies to reduce cash circulation, promote digital payments, and enhance the overall digital banking ecosystem. Raast, with 37 million digital accounts and Rs. 15 trillion in transactions, has been a game changer in digital banking.

Chairman of the Pakistan Banks’ Association, Zafar Masud, highlighted that increasing digital adoption is breaking down barriers to financial inclusion in Pakistan, engaging people in the formal financial system, driving economic growth, and providing substantial benefits to SMEs through Digital Supply Chain Finance (DSCF).

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. 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 PBA to work with SBP on enhancing financial inclusion in agriculture and SMEs, particularly through technology and leveraging existing digital platforms.

Zafar Masud pointed out that Pakistan stands at a unique crossroads with significant 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.

Responding to audience queries, Saleem Ullah and Zafar Masud stated that start-ups would be facilitated through a private equity fund. Although banks typically lack the requisite infrastructure and public money at commercial banks needs to be risk-protected, banks should also increase their risk appetite. Saleem Ullah also mentioned that cash flow-based lending instead of collateral-based lending is being encouraged, and he stressed the importance of consumer data protection by open and digital banks. Zafar Masud noted that a gradual psychological shift is occurring in the banking sector to create ease of access to credit.

Aamir Aftab, Chief Product Officer at JazzCash, stated, “Pakistan is home to approximately 3 million SMEs, and JazzCash aims to digitize their 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. With policy interventions that incentivize digital payments, we can accelerate the adoption of digital financial services. JazzCash’s extensive network allows it to digitize over PKR 100 billion each month, serving a customer base of 44 million.”

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

The summit featured a major panel discussion with President NBP, Rehmat Hasnie; President HBL, Nassir Salim; Deputy CEO of Meezan Bank, Syed Amir Ali; CEO of HBL Microfinance Bank, Muhammad Amir Khan; and Hamayun Sajjad, CEO of Mashreq Bank. They discussed issues such as 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 of the Shariah Board of Meezan Bank, and Khurram Warraich, Group Head of 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.