Qudsia Bano

The State Bank of Pakistan (SBP) recently mandated the banks in the country to develop and implement digital solutions for Supply Chain Finance (SCF) within six months. This move aims to leverage technology to increase access to finance for small and medium enterprises (SMEs) and digitize retail payments, reports WealthPK. The circular issued by the SBP requires that the banks establish an effective SCF function with suitably trained human resources and systems to develop and offer digital SCF products to SMEs. The banks can either develop their digital solutions for SCF or partner with the fintech companies and service providers. Experts believe this initiative is a significant step towards fostering economic growth in Pakistan. Dr. Farooq Nadeem, Senior Economist at the Standard Chartered Bank said, “This mandate from the SBP is a timely intervention. By promoting digital SCF solutions, the central bank is not only facilitating easier access to finance for SMEs but also encouraging innovation and efficiency in the banking sector.”

Increased access to finance would enable SMEs to expand their operations, leading to job creation and overall economic development, he added. The digital SCF solutions are expected to enhance the operational efficiency, reduce costs, and strengthen risk management practices in the banking sector. According to Bilal Ahmed, a financial analyst at a leading startup, “The adoption of digital SCF solutions will streamline processes and reduce the administrative burden on the banks and SMEs. This will result in quicker turnaround times for loan approvals and disbursements, making it easier for SMEs to manage their cash flows and invest in growth opportunities.” Furthermore, the mandate aligns with the broader goal of digitizing the economy and reducing reliance on cash transactions. The increased use of digital payment systems will contribute to greater transparency and accountability in financial transactions, which is crucial for combating corruption and improving the overall business environment.

Asfand Yar Khan, DG IT highlighted the potential for collaboration between the banks and fintech companies. “This initiative opens up numerous opportunities for fintech companies to partner with the traditional banks and bring innovative solutions to the market. It will drive competition and lead to better products and services for SMEs,” he said. The central bank’s directive is also expected to improve the financial inclusion of SMEs, many of which have historically faced challenges in accessing credit. By leveraging digital platforms, the banks can reach a larger number of SMEs, including those in remote and underserved areas. This will not only support the growth of individual businesses but also contribute to the overall economic development of the country, said Asfand.

Credit: INP-WealthPk