State Bank of Pakistan (SBP) has received 20 digital bank applications from a range of institutions, in an exercise the regulator said reflects the confidence market players have in the Republic’s financial sector.
Applicants range from financial incumbents such as domestic commercial banks and microfinance banks as well as electronic money institutions and fintech companies. The identities of the applicants were not revealed.
The central bank opened applications for three months starting in January when it launched its digital bank framework, which outlines requirements for two types of digital bank license: digital retail banks and digital full banks, which serve corporate entities in addition to retail consumers.
SBP had said it will initially grant only up to five licenses.
“Foreign players already operating in the digital banking space overseas have also expressed their interest to venture into [the] Pakistani market. The strong interest shown by both local and international players into SBP’s digital banks’ initiative reflects their confidence in the financial sector of Pakistan and the potential of the investment opportunities available in the country,” the apex bank noted.
Pakistan is a strong proponent of Islamic banking, with both the central bank and Securities Exchange Commission of Pakistan supporting the industry with dedicated regulations and policies. As at the end of 2021, Islamic banking assets accounted for 18.6% of the total banking asset market share. As such, it is not unlikely that one of the licenses may be extended to an Islamic digital banking service provider,
“The demand for banking services is also faith-sensitive and there is a large market for Shariah compliant services,” the SBP said when at the launch of its digital bank framework. “Therefore, licenses for digital retail banks and digital full banks may be obtained for both conventional and Islamic variants. Further, conventional variants may also offer Islamic banking services through Islamic windows as per existing practice.”