SBP issues NOCs to 5 applicants for establishing digital banks in Pakistan

State Bank of Pakistan (SBP) has issued no objection certificates for the establishment of digital banks to the following five (5) applicants: (i) Easy Paisa DB (Telenor Pakistan B.V. & Ali Pay Holding Ltd.); (ii) Hugo Bank (Getz Bros & Co., Atlas Consolidated Pte. Ltd., & M & P Pakistan Pvt. Ltd.); (iii) KT Bank (Kuda Technologies Ltd., Fatima Fertilizer Ltd., & City School Pvt. Ltd.); (iv) Mas (Kuwait Investment Authority through – PKIC and Enertech Holding Co.).

In line with international best practises, the SBP introduced a Licensing and Regulatory Framework for Digital Banks in January 2022 and agreed to issue licences for up to five (5) digital banks. The Framework was the initial stage in developing fully functional digital banks in Pakistan. The digital banks are expected to deliver all banking services digitally, eliminating the need for consumers to physically visit bank offices.

By March 31, 2022, SBP has received twenty (20) applications from a variety of interested parties, including commercial banks, microfinance banks, electronic money institutions, and Fintech enterprises, in response to its Licensing and Regulatory Framework for digital banks. In addition, a number of foreign businesses, notably venture capital firms already active in the digital banking field, have expressed interest in entering the Pakistani market either alone or in partnership with local firms.

In accordance with the Framework’s standards, five (5) applications were selected following a comprehensive and rigorous evaluation procedure. Applicants were evaluated based on a variety of criteria, including their fitness and propriety, experience, and financial strength, as well as their business plans, implementation plans, funding and capital plans, IT and cybersecurity strategies, and outsourcing arrangements, among others. In addition, each candidate had the opportunity to present their business case to SBP.

Each of these five (5) applicants will establish a public limited company with the Securities and Exchange Commission of Pakistan moving forward. Then, they will approach SBP for In-Principle Approval in order to demonstrate operational preparedness and initiate pilot phase activities. Subsequently, they will commence their operations commercially after receiving SBP’s approval.

The SBP anticipates that once these digital banks establish operations, they would promote financial inclusion by offering affordable/cost-effective digital financial services, including credit access, to unserved and underserved parts of society.