SBP governor urges banks to keep human judgments above AI decisions in loan approvals

While the banking sector is rapidly deploying artificial intelligence (AI) to improve efficiency, strengthen risk management, and cut costs, State Bank of Pakistan (SBP) Governor Jameel Ahmad has urged financial institutions to keep human judgment over and above the AI-driven decisions in sensitive areas such as loan approvals and customer due diligence.

“Human oversight remains essential to monitor AI driven decisions, especially in sensitive areas such as credit approval and customer due diligence,” the central bank chief Ahmad said while speaking at the sixth AlBaraka Forum Regional Conference - Pakistan 2026 titled “Islamic Economy in the Digital Age - Innovation Within The Framework of Compliance.” on Monday.

The governor, however, gave greater importance to the AI and other technological advancement in the sector, stating that as a result of SBP’s policy interventions, expansion of digital financial services and digital infrastructure, and strong consumer adoption of the internet based platforms, the “national payment ecosystem has witnessed significant advancements in recent past”.

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Mobile banking apps, including banks, branchless banking, wallets and EMIs [Electronic Money Institutions] have been the primary growth drivers accounting for 78% of total digital retail transactions,” Ahmad said.

According to SBP governor, more than 70% of people worldwide use at least one digital financial service, while over 80% are willing to shift to digital banking.

“This clearly signals a major change in consumer behaviour and expectations.”

Connecting this with the Shariah-compliant banking, Ahmad said Islamic finance entered the digital age with a distinct feature.

Islamic finance should closely link financial activity with the real economy, and it must do so without compromising fairness, transparency, and shared prosperity, he emphasised.

“Islamic finance is not a random set of transactions. It is not merely conventional banking with different parameters. Instead, it is a deliberate effort to build an inclusive ecosystem, an ecosystem that serves the diverse financing needs of the wider community rather than a select few.”

Ahmad stressed that the adoption of digital innovation was not an end by itself, but a means to serve broader socioeconomic purposes.

“Technology adoption in Islamic finance as well as the broader financial services industry can significantly expand financial inclusion. It can lower costs, reduce geographic barriers, and enable access to finance for small businesses, farmers and women entrepreneurs, segments of our society that have traditionally remained outside the former/farmer system,“ the central bank chief said.

The SBP granted principle approval to five digital banks in 2022. Presenty, one digital bank has already started its Islamic operations, while another is in pilot phase marking a new chapter in shariah compliant digital finance in the country.

“Initiatives such as Raast, Assan Mobile Account, digital onboarding frameworks, Roshan Digital Account and licensing of digital banks have collectively expanded access of formal financial services to the masses.

“There is also a risk that technology may simply replicate conventional financial models in digital form, prioritising speed and scale over substance and alignment as per Shariah principles. To mitigate these risks, financial institutions must go beyond basic compliance. they must have robust data protection frameworks and uphold the highest regulatory standards,“ he said.

Emphasising the strategic importance of aligning digital innovation with Islamic finance principles, AlBaraka Forum for Islamic Economy Secretary General Yousef Hassan Khalawi said if Islamic finance effectively facilitated the digital economy within Islamic banking, it would progress in parallel with conventional banking.

“Both systems are entering the digital era at the same time, and the real differentiator will be how innovation is governed and aligned with values, compliance, and institutional integrity,” Khalawi said.

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“The challenge today is no longer whether the Islamic economy can be digitised, but how this transformation is managed. Sustainable digital Islamic finance requires strong institutional frameworks and the active engagement of scholars, regulators, and industry leaders to ensure that innovation remains aligned with Shariah objectives and long-term economic stability.”

AlBaraka Bank Pakistan Chief Executive Officer Muhammad Atif Hanif said Pakistan’s banking sector continued to make steady progress.

“By integrating digital solutions with the principles of the Islamic economy and Shari’ah compliance, we are able to engage broader segments of society through a more inclusive, accessible, and trusted financial system,” he said.