Need to digitise global Islamic financial services industry: Baqir

KARACHI: State Bank of Pakistan Governor Dr Reza Baqir has said global Islamic financial services industry needs digital transformation for growth, with need to focus on innovative service delivery that aligns with expectations of 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, a statement said on Wednesday.

The theme of the summit was “Islamic Finance and Digital Transformation: Balancing Innovation and Resilience.”

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 digitalisation happening in the financial landscape, the SBP governor emphasised that the Islamic finance industry also needed to digitise their financial services and transform their processes to improve efficiency, reduce intermediation cost and increase outreach to a wider segment of society.

He pointed out that digitalisation of Islamic financial services offers tremendous opportunities in achieving a more inclusive financial system for Islamic countries, where a significantly large number of adult population was unbanked than the rest of the world.

He advised that development of Shariah and prudential standards related to fintechs and digital banking, by the international standards setting bodies such as AAOIFI and IFSB, would prove pivotal for the fast-paced development of global Islamic financial industry and recommended to set up a technical working group to specifically work on these standards.

He talked about the key initiatives taken by the SBP during the last few years on the digital front, especially in the wake of the Covid-19 pandemic. He especially mentioned the SBP’s initiatives pertaining to National Payment Systems Strategy, digital on boarding 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 panellists 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 panellists also shed light on new regulatory and supervisory challenges for the financial sector regulators posed by technological advancements. Further, they discussed policy implications of digitalisation that focuses 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 organisations, multilateral development banks, academics and think tanks.