SBP governor calls for human oversight in AI-driven banking decisions, especially in credit approvals

State Bank of Pakistan (SBP) Governor Jameel Ahmad has emphasised the need for human oversight in AI-driven decisions, particularly in sensitive areas like loan approvals and customer due diligence. 

As per media reports, speaking at the sixth AlBaraka Forum Regional Conference, Ahmad highlighted the importance of maintaining human judgment to ensure decisions align with regulatory and ethical standards. "Human oversight remains essential to monitor AI-driven decisions, especially in areas such as credit approval and customer due diligence," he said, stressing that while AI can improve banking operations, it should not replace critical human involvement in these sensitive functions.

The BSP governor also underscored the role of digital transformation in Pakistan's financial sector, citing the SBP's policies and interventions that have led to significant advancements in the national payment ecosystem. He pointed to mobile banking apps, branchless banking, digital wallets, and electronic money institutions (EMIs) as the main drivers of growth, contributing to 78% of total digital retail transactions.

He noted that over 70% of people globally now use at least one digital financial service, with over 80% willing to shift to digital banking. This shift signals a major change in consumer behaviour and expectations, Ahmad added.

The governor connected these advancements with Islamic finance, emphasising that Islamic finance must remain deeply tied to the real economy, ensuring fairness, transparency, and shared prosperity. He noted that Islamic finance, unlike conventional banking, aims to build an inclusive financial ecosystem that serves the diverse needs of society, not just a select few.

Ahmad also discussed how digital innovation in Islamic finance could drive greater financial inclusion, particularly for small businesses, farmers, and women entrepreneurs, who have traditionally been excluded from the formal financial system. He stressed that the goal of digital adoption is not just technology for its own sake but to serve broader socioeconomic purposes.

In 2022, the SBP granted principal approval to five digital banks, with one already starting its Islamic operations and another in the pilot phase. These developments represent a new chapter in Shariah-compliant digital finance in Pakistan.

However, Ahmad cautioned that the rapid expansion of digital finance could lead to a risk of replicating conventional financial models in digital form without proper alignment with Shariah principles. To mitigate these risks, financial institutions must go beyond basic compliance and establish robust data protection frameworks while adhering to the highest regulatory standards.

Yousef Hassan Khalawi, Secretary General of the AlBaraka Forum for Islamic Economy, emphasised that the real challenge lies not in digitising Islamic finance but in managing the transformation, calling for strong institutional frameworks and active engagement from scholars, regulators, and industry leaders to ensure that digital innovation aligns with Shariah objectives and contributes to long-term economic stability.

Muhammad Atif Hanif, CEO of AlBaraka Bank Pakistan, added that by integrating digital solutions with Islamic economic principles, Pakistan’s banking sector continues to progress toward a more inclusive and accessible financial system.