November 10, 2021: Governor State Bank of Pakistan, Dr. Reza Baqir, stated that digital transformation of the global Islamic financial services industry has become a necessity for its growth and it needs to focus on innovative ways of service delivery that aligns with expectations of today’s tech-savvy and convenience-driven customers.
He was speaking at the 15th Islamic Finance Services Board (IFSB) Summit 2021 hosted by the Saudi Central Bank in Jeddah. The theme of the summit was “Islamic Finance and Digital Transformation: Balancing Innovation and Resilience.”
Dr. Reza Baqir, who is the Deputy Chairman of the Council of IFSB, was chairing a session on ‘Digital Transformation of Islamic Financial Services: Opportunities, Challenges, and Policy Implications’. Other attendees at the summit included the central bank Governors of Saudi Arabia, UAE, Bahrain, Indonesia, Oman, and Libya.
With fast digitalization happening in the financial landscape, Governor SBP emphasized that the Islamic finance industry also needs to move to digitize their financial services and transform their processes to improve efficiency, reduce intermediation costs and increase outreach to a wider segment of society.
He pointed out that the digitalization of Islamic financial services offers tremendous opportunities in achieving a more inclusive financial system for Islamic countries, where a significantly large number of the adult population is unbanked than the rest of the world.
He advised that the development of Shariah and prudential standards related to fintech and digital banking, by the international standards-setting bodies such as AAOIFI and IFSB, would prove pivotal for the fast-paced development of the global Islamic financial industry and recommended setting up a technical working group to specifically work on these standards.
Governor SBP touched upon the key initiatives taken by the State Bank of Pakistan during the last few years on the digital front, especially in the wake of the COVID-19 pandemic. He especially mentioned SBP’s initiatives pertaining to National Payment Systems Strategy, digital onboarding framework to bring banking services to the fingertips of the customers, digital on-boarding of merchants to facilitate the growth of digital payments, and Roshan Digital Accounts for providing innovative banking solutions to millions of Non-Resident Pakistanis (NRPs).
Other panelists of the session discussed how the digital transformations could benefit and bring significant opportunities for the Islamic finance industry allowing greater accessibility, convenience, speedy payment transactions, and operational efficiency. The panelists also shed light on new regulatory and supervisory challenges for the financial sector regulators posed by technological advancements. Further, they discussed policy implications of digitalization that focus on maintaining a balance among financial innovation, integrity, and stability.
The 15th IFSB Summit 2021 focused on ways to foster innovation, technological adoption, accessibility, and sustainability in the Islamic financial system to aid its future growth and development. It also highlighted policy implications arising from rapid digital transformation and the work to be done, going forward, to strengthen its resilience and stability.
The Summit convened together high-level participants from regulatory and supervisory authorities, government officials, commercial institutions offering Islamic financial services, international organizations, multilateral development banks, academics, and think tanks.