SBP governor for mitigating digital innovation-related risks
KARACHI: Governor of the State Bank of Pakistan (SBP), Jameel Ahmad has warned that while digital innovation offers vast opportunities for the financial sector, it also brings significant risks, including cybersecurity threats, data breaches, and challenges to consumer protection.
He said that to mitigate these risks, financial institutions must go beyond basic compliance and they must have robust data protection frameworks and uphold the highest regulatory standards. “Human oversight remains essential to monitor AI driven decisions, especially in sensitive areas such as credit approval and customer due diligence,” he mentioned.While speaking at the sixth AlBaraka Forum Regional Conference, themed “Islamic Economy in the Digital Age: Innovation within the Framework of Compliance” here on Monday, Governor SBP said the global financial system is undergoing one of the most profound transformations in history and presently more than 70 percent of people worldwide use at least one digital financial service and over 80 percent are willing to shift to digital banking. Therefore, no financial firm can sustainably grow or even maintain its footprint without a strong and scalable digital presence, he said.
He said that 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 system, he added.
With regards to digital financial services, he mentioned that SBP is continuously updating its regulations and working on fast, secure, and land digital payments infrastructure in the country.
For Islamic finance, the governor underlined the need for continuous and meaningful engagement among Shariah scholars, regulators, fintech firms and customers. He said only a collaborative approach can ensure that digital innovation remains responsible and consistent with the core values of Islamic finance.
He reiterated that the state bank remains focused on promoting innovation while safeguarding financial stability and consumer interests, ensuring that the digital evolution of the financial sector supports inclusive and ethical growth.
Governor SBP highlighted that Islamic finance is entering the digital era with a unique identity. Unlike conventional banking, Islamic finance is rooted in divine principles of justice, transparency, and risk sharing.
He mentioned that guided by the Makasif-e-Shariah, it aims to closely connect financial activities with the real economy while upholding fairness, transparency, and shared prosperity. Under ideal conditions, he noted, Islamic finance is not a random collection of transactions but a deliberate system designed to serve broader economic and social objectives.
He emphasized that “the digital age presents yet another opportunity for Islamic finance industry to grow and contribute to the growth and development of the economy and our season.”
Governor SBP said that the Islamic banking industry must prepare its human capital to work today for the demands of its growing and digitally enabled future. He asked the banking industry to strengthen its engagement with chambers of commerce and trade bodies as great collaboration can unlock new trade, investment and business opportunities.
He informed that under the licensing framework for digital banks introduced in 2022, five entities were granted in principle approval. Presently, 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.
On the occasion, Yousef Hassan Khalawi, Secretary General of the AlBaraka Forum for Islamic Economy, emphasized the strategic importance of aligning digital innovation with Islamic finance principles. “If Islamic finance effectively facilitates the digital economy within Islamic banking, it will 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,” he said.
He said “the challenge today is no longer whether the Islamic economy can be digitalized, 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 Shari’ah objectives and long-term economic stability.”
Muhammad Atif Hanif, Chief Executive Officer of AlBaraka Bank Pakistan said that Pakistan’s banking sector continues 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 added.
The Conference witnessed the participation and contributions of a distinguished group of senior leaders, regulators, and scholars, including Zafar Masud, Chairman of the Pakistan Banks’ Association and President & CEO of The Bank of Punjab; Muhammad Nassir Salim, President and CEO HBL; Mohammad Shoaib, CEO of Lucky Investments Limited; Mufti Dr Irshad Ahmad Aijaz, Chairman of the Shari’ah Advisory Committee at the SBP and Dr Umar A Oseni, Secretary General of the Organization of Islamic Cooperation (OIC).
The conference also premiered a documentary produced by the AlBaraka Forum for Islamic Economy titled “Islamic Economy and the Advancement of Digitalization Across Asia – The Pakistan Experience,” offering an in-depth perspective on Pakistan’s evolving role in shaping the digital Islamic economy across the region, with a focus on financial inclusion, digital innovation, and institutional frameworks.
The conference concluded with clear and forward-looking outcomes, including the call for establishing a transparent and integrated framework for digital Islamic banking, strengthening coordination among banks, Shari’ah boards, and financial regulators, and reinforcing Pakistan’s position as a regional reference model for a stable, inclusive, and institutionally governed digital Islamic economy.
Copyright Business Recorder, 2026