Five ‘digital banks’ given NOCs

To promote financial inclusion in unserved, underserved segments of society, says SBP

KARACHI:

Pakistan’s central bank has allowed five financial institutions, which includes none of the top six conventional banks in the country, to establish full-fledged “digital banks”.

The State Bank of Pakistan (SBP) has issued no objection certificates (NOCs) to five institutions under its licensing and regulatory framework, including Easy Paisa DB, Hugo Bank, KT Bank, Mashreq Bank and Raqami, according to a statement issued on Friday.

“The digital banks are expected to provide all the banking services through digital means without any need for their customers to visit the bank branches physically,” the central bank statement said.

Earlier in January 2022, the SBP had introduced a Licensing and Regulatory Framework for Digital Banks “in line with international best practices” and decided to issue up to five digital banks’ licenses. The framework was the first step towards introducing full-fledged digital banks in Pakistan.

By March 31, 2022, SBP had received 20 applications from a diverse range of interested players, including commercial banks, microfinance banks, electronic money institutions and Fintech firms. A number of foreign players, including venture capital firms already operating in the digital banking space, also expressed their interest in venturing into the Pakistani market directly or in collaboration with local partners.

The five applicants awarded the NOCs were selected after a thorough and rigorous assessment process as per the requirements of the framework. They were assessed on various parameters that included “fitness and propriety experience and financial strength; business plan; implementation plan; funding and capital plan; IT and cybersecurity strategy and outsourcing arrangements, etc.”

All the applicants were given the opportunity to present their business case to the SBP.

Going forward, each of the five applicants will incorporate a public limited company with the Securities and Exchange Commission of Pakistan (SECP). Afterwards, they will approach the SBP for In-Principle Approval for demonstrating operational readiness and for the commencement of operations under the pilot phase. After obtaining the SBP’s approval, they will launch their operations commercially.

“The SBP expects that after the commencement of operations, these digital banks will promote financial inclusion by providing affordable/cost effective digital financial services including credit access to unserved and underserved segments of the society,” said the central bank.

Details suggest that Easy Paisa DB is a consortium of Telenor Pakistan B.V and Ali Pay Holding Limited; Hugo Bank comprises of Getz Bros and Company, Atlas Consolidated Pte. Limited. and M & P Pakistan Private Limited.

KT Bank is by Kuda Technologies Limited, Fatima Fertiliser Limited and City School Private Limited; Mashreq Bank is by Mashreq Bank (UAE) and Raqami is a consortium of the Kuwait Investment Authority through – PKIC and Enertech Holding Co.

Published in The Express Tribune, January 14^th, 2023.

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