SBP grants In-Principle Approvals (IPA) to five digital banks. Who are they?

All digital retail banks DRBs now have 12 months to get operationally ready.

KARACHI: On Wednesday, in a momentous ceremony at the State Bank of Pakistan (SBP) Museum Building in Karachi, Governor SBP, Mr. Jameel Ahmad awarded IPAs to the five proposed digital banks including HugoBank Pakistan, KT Bank Pakistan Limited, Mashreq, Raqami Islamic Digital Bank, and Telenor Microfinance Bank.

It may be recalled that SBP issued a No Objection Certificate (NOC) to these five successful applicants for establishing digital banks in Pakistan in January 2023, allowing them to incorporate as a Public Limited Company with the Securities and Exchange Commission of Pakistan (SECP). These institutions were selected after a thorough and rigorous evaluation process based on a comprehensive set of parameters including fitness and propriety, experience and financial strength; business plan; implementation plan; funding and capital plan; IT and cybersecurity strategy and outsourcing arrangements. After the fulfilment of the necessary requirements, these entities have now been granted in-principle approval to prepare themselves operationally to launch digital financial services. 

During his keynote address, Governor SBP highlighted the significance of the initiative of introducing Digital Retail Banks (DRBs) in the country, its profound benefits to the financial system and some of the key challenges faced by such genre of financial players. 

The governor also mentioned a few other important regulatory initiatives in support of building a digital financial ecosystem and assured that SBP is fully committed to supporting various stakeholders for a bright, innovative, and digitally empowered future of banking in Pakistan. 

Highlighting the challenges digital banking is expected to confront in the Pakistani market, the SBP chief said that ensuing cyber security and data privacy of customer data is paramount for digital banks.“The digital banks must invest in robust security measures to protect against cyber attacks, cyber breaches and fraud,” he said. “In this regard, the SBP is currently revisiting its guidelines on information security and cyber security,” he shared. He added that these digital banks would have to work towards building digital literacy, and customer trust. 

Hugo Bank

Hugo Bank is a joint venture between Getz Bros — the pharma, Pakistani courier M&P, and Atlas Consolidate, which runs the Singaporean fintech Hugosave. 

Chairperson of the Board of HugoBank, highlighted the unwavering commitment to Pakistan’s socio-economic development through digital offerings that boost GDP and foster financial inclusion.

Kamran Nishat, MD & CEO at Muller & Phipps Pakistan and Board Member at HugoBank, said, “M&P Pakistan has been a formidable player in the branchless banking landscape for nearly a decade and understands the intricate dynamics of financial accessibility in Pakistan. Our expansive network, which is within a 20-minute reach of 180 million Pakistanis, would help strengthen HugoBank’s mission. This collaboration is a step forward in ensuring every Pakistani has seamless access to modern financial services.”

David Fergusson, CEO of Atlas Consolidated and Board Member at HugoBank, added, “Atlas brings with it a rich heritage of fintech innovation. Our collaboration with HugoBank is as its shareholders and as its technological vanguards with financial services experience in consumer markets. Recognizing the immense potential of emerging markets, particularly Pakistan, we believe that digital banking has the power to uplift and transform lives. Through our combined expertise, we are committed to making this vision a reality.”

Atyab Tahir, CEO of HugoBank said “We extend our deepest gratitude to the SBP, appreciate their trust in HugoBank and their unwavering commitment to promoting digital banking and financial inclusion in Pakistan. This approval is a recognition of HugoBank’s potential and a testament to SBP’s forward-thinking vision for financial services for the nation. We congratulate all DRB aspirants who have been awarded the IPA by the SBP.”

HugoBank is now prioritising its operational preparedness in accordance with SBP’s guidelines for Digital Banking licensing. The bank aims to first launch a pilot for the general public, followed by a full commercial phase.

KT Bank

KT Bank is a joint venture between two Pakistani companies — Fatima Fertilizer and City School — and Nigerian-origin fintech KudaBank. Speaking at the event, KT Bank shared plans that it has laid out which included introducing tailored solutions for 8 educational institutions, solutions for farmers’ access to the latest technology and solutions for agri-research funding. 

Mashreq Bank

Fernando Morillo, SEVP Group Head of Retail Banking at Mashreq Bank, said “We’re thrilled at the opportunity. In terms of building the right infrastructure and system and a massive population willing to embrace the future, there are perhaps one or two countries like Pakistan in the world. It is hard to see countries where regulation is so clear and progressive.”

Mashreq is among the biggest banks in the Middle East, majorly owned by UAE’s Al Ghurair family. It is one of the largest conventional banks in the Middle East and also has a brick-and-mortar presence in Pakistan. Mashreq Bank’s digital bank offerings in the middle east include specialised banking solutions for startups and SMEs, and calls itself the “Best Digital Bank” in the MiddleEast. 

Raqami Bank

Raqami Bank is being set up by a consortium of two Kuwaiti companies. The group behind Raqami comprises the oldest and one of the world’s biggest sovereign wealth funds, the Kuwait Investment Authority through Pakistan-based Pak-Kuwait Investment Company (PKIC). KIA has $738 billion in assets under management. The other equity partner is also a Kuwait-based company, Enertech Holding Co. which is a developer, investor and operator in the energy sector.  

Raqami Bank mentioned its commitment to serve the market underserved by commercial banks which include agriculture, women and small and medium-sized enterprises (SMEs). The mentioned its commitment to continue investing in Pakistan. 

Telenor Microfinance Bank

Telenor Microfinance Bank provides financial services to the unserved and underserved segments. EasyPaisa, a mobile wallet which leverages a network of branchless banking agents is a subsidiary of Telenor Bank. It is backed by telco Telenor and Chinese Ant Financial, which owns the biggest fintech in the world AliPay. 

As of 2022, EasyPaisa has crossed 54 million users. Total transaction value is expected to cross Rs 3 trillion this year. 

Next steps

All digital retail banks DRBs now have 12 months to get operationally ready. Upon attaining the operational readiness, these institutions will be required to seek approval of SBP for the commencement of their operations. 

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Mariam Umar Farooq
Mariam Umar Farooq
The author is a business journalist and a member of the staff. She can be reached at [email protected]


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