Financial Crime World

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Banking Sector in Pakistan: A Study of Challenges and Opportunities

A report by PwC Pakistan highlights the pressing concerns and potential areas of growth in the banking sector of Pakistan.

Regtech: The Way Forward

The deployment of technology can significantly reduce the cost of compliance for banks, with a potential reduction of 30% to 50%. Structured tech optimization reviews, validation, and remediation, aided by data-driven models, can enhance anti-financial crime readiness. Additionally:

  • Only 57% of respondents consider their risk assessments as “good” or “excellent”.
  • Enterprise-level financial crime risk assessment programs require improvement.

ESG and Sustainability

The banking sector in Pakistan is expected to play a crucial role in promoting environmental, social, and governance (ESG) practices. Banks may need to adapt to changing regulatory requirements, integrate ESG into their business models, and set ambitious sustainability targets. The:

  • State Bank of Pakistan (SBP) has issued an Environmental and Social Risk Management manual.
  • Securities and Exchange Commission of Pakistan (SECP) has launched its own ESG roadmap.

Culture and Talent

Culture has risen to prominence in recent years, with 66% of C-suite and board members considering it more important than strategy or operating model. Banks in Pakistan face talent scarcity, particularly in areas such as:

  • Technology
  • Digital
  • Data sciences
  • Financial engineering
  • Islamic banking
  • Risk management
  • Financial crime compliance

Collaboration with academia and the establishment of Centres of Excellence for trainings can help address these challenges.

Islamic Banking

The Islamic Banking Industry (IBI) has shown phenomenal growth, with a 20% share in total assets and 25% in advances and deposits. However, banks may face challenges during the conversion to Islamic mode by December 2027. A holistic Islamic transformation and conversion program can address these concerns.

Diversity, Equality, and Inclusion

Designing experiences for employees, including cultural adaptability for the next-gen workforce, is critical for improving working environments, driving innovation, and enhancing business performance. Key elements include:

  • Improving working environments
  • Driving innovation
  • Enhancing business performance

Retail Business and Policies

There is considerable potential in the retail banking sector, with a robust demand from diversified customer clusters. Banks can leverage this opportunity by developing targeted marketing strategies and products that cater to the needs of unbanked and under-banked individuals.

Economic Analytics

The report highlights the challenges faced by Pakistan’s economy, including an acute slowdown and long-standing structural imbalances. Experts have warned that the road to recovery will be challenging, given the global economic shocks.

This comprehensive report provides insights into the pressing concerns and potential areas of growth in the banking sector of Pakistan. It serves as a valuable resource for policymakers, regulators, and industry stakeholders seeking to navigate the challenges and opportunities ahead.