Dr Haque calls this better plumbing for the same pipe, because the rails still carry payments through banks. But Raast is State Bank infrastructure, open by design to electronic money institutions, digital banks and fintech lenders, and the data exchange I proposed would let a non-bank lender price a borrower as well as a bank can.
Banks here are already working, with the regulator, on sophisticated digital solutions, particularly in lending, and on stable coin-based settlement and remittance solutions, a step most comparable economies have yet to take, and one that will move value outside the traditional balance sheet altogether.
The innovation from outside that Dr Haque wants is arriving through exactly these doors; what limits it is not the pipe but the field, because an undocumented borrower is invisible to a fintech and a bank alike.
- “KYC treats depositors as guilty; banks face no scrutiny”
Those rules are not written by banks. They are the universal obligations Pakistan accepted to leave the FATF grey list in 2022, an exit the whole economy needed and banks paid for in systems, staff and friction with their own customers.
As for scrutiny: onsite inspection, a conduct regime, a banking ombudsman and a Competition Commission with full jurisdiction hardly amount to none.
- “A banks-based economy is not a growth economy”
History disagrees, as outlined in Table 2. The World Bank literature associated with Levine and Demirgüç-Kunt found that bank-based versus market-based structure does not by itself explain growth; depth and institutional quality do — that’s exactly what Same Banks, Different Field alludes to.
Table 2: Financial structure and growth
- “Equity, not credit; can a pension fund buy a PIB without a bank in the way?”
On equity I agree, but the argument must be followed to its source. Market capitalisation is under a tenth of GDP because family-owned corporates will not list, and Mr Kardar told us why: listing brings exposure to the tax authorities.
The equity market is starved by the same informality that starves credit. And risk capital is not the domain of banks anywhere; a deposit repayable on demand cannot fund a venture that takes a decade to pay back.
Equity needs pension funds and life insurers, and here those pools barely exist: pension assets are a fraction of one percent of GDP, against double digits in India and more than half of GDP in Malaysia. That is not a matter for the banks or their regulator to sort-out. As for the claim that funds can buy government paper only through banks: that is no longer true. Government securities are listed on the Pakistan Stock Exchange, where funds and retail investors alike can buy them directly, and under a new arrangement the exchange can conduct their primary issuance as well. National Savings offers the state’s own instruments to retail savers, often at better pricing than the market. The options are open at both ends of the market; where take-up is modest, the constraint is appeal, not access.
What I would co-sign
Most of Dr Haque’s reform list I support: retail access to government debt, non-bank primary dealers, open fund distribution, deeper FX participation, and a Sparkassen-style tier, of which the provincial banks are already the outline. But none of it changes the field. A state that collects a tenth of national income in tax will borrow the difference from whoever holds the nation’s savings, and punishing those institutions with ever-higher rates and windfall levies only narrows the base that pays for it. Every bond market, pension fund and equity culture Dr Haque wants will be pre-empted by the same sovereign until the deficit narrows. Dr Haque’s latest column (“The sovereign-bank nexus and its pitfalls”, 30 September) already moves this way: the word cartel is gone, and shrinking the sovereign’s absorption of banking resources leads his own prescription — which is precisely the third ask below.
So let me add three asks, and invite Dr Haque to put his name beside mine. First, a legislated schedule that cuts corporate and bank tax rates as the base widens. Second, a documentation-linked credit incentive: a firm that files its accounts this year earns cheaper credit next year, through a first-loss guarantee funded from the revenue it helped raise. Financial Data Exchange is the answer. Third, a statutory ceiling on the sovereign’s borrowing from banks as a share of deposits, so that the state’s claim on the balance sheet is a benchmark, not a monopoly.
Do those three things and banks will do what banks do everywhere: find borrowers, price risk and compete.
Banks have been on the dartboard of criticism universally and throughout history, and Dr Haque’s article is no surprise. I had, as it happens, just finished Admati and Hellwig’s The Bankers’ New Clothes. My worry is not the criticism but the misdirection. Let us put the blame where it belongs, which is the narrow tax base; broaden it, and the remaining pieces, including whatever needs fixing on the regulatory side, will fall into place. Until we accept the facts on the ground, we will not find the solutions that close the gaps, to the larger benefit of everyone.–Concluded
Copyright Business Recorder, 2026
The writer is President and CEO of The Bank of Punjab