KARACHI: State Bank of Pakistan Governor Dr Reza Baqir has said that the Islamic finance industry needs to speed up digitisation of its services and transform processes to improve efficiency, reduce intermediation cost and increase outreach to a wider segment of society.

Speaking at the 15th Islamic Finance Services Board (IFSB) Summit hosted by the Saudi Central Bank in Jeddah, Mr Baqir said that digital transformation of the global Islamic financial services industry has become a necessity for its growth and it needs to focus on innovation in ways of service delivery to meet the expectations of today’s tech-savvy and convenience-driven customers.

Dr 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’.

He said that digitalisation of Islamic financial services offered tremendous opportunities in achieving a more inclusive financial system for Islamic countries, where a significantly large number of adult population is unbanked.

He said that development of Sharia and prudential standards related to fintechs and digital banking, by the international standards setting bodies such as Accounting and Auditing Organisation for Islamic Financial Institutions and IFSB, would prove pivotal for the fast-paced development of global Islamic financial industry and recommended setting up of a technical working group to specifically work on these standards.

He also briefed the session about the key initiatives taken by SBP during the last few years on the digital front, especially in the wake of Covid-19 pandemic. He especially mentioned SBP’s initiatives pertaining to National Payment Systems Strategy, digital on-boarding framework to bring banking services at customers’ fingertips, 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 attendees at the summit included the central bank governors of Saudi Arabia, the UAE, Bahrain, Indonesia, Oman and Libya.

The panelists discussed how digital transformation could benefit and bring significant opportunities for the Islamic finance industry, allowing greater accessibility, convenience, speedy payment transactions and operational efficiency.

The panelists shed light on new regulatory and supervisory challenges for the financial sector regulators posed by technological advancement. Further, they discussed policy implications of digitalisation that focuses on maintaining a balance among financial innovation, integrity and stability.

The theme of the summit was “Islamic Finance and Digital Transformation: Balancing Innovation and Resilience”. It 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 organisations, multilateral development banks, academics and think tanks.

Published in Dawn, November 11th, 2021