SBP Directs Banks To Adopt Digital Supply Chain Finance Solutions

In a recent development, the State Bank of Pakistan (SBP) has mandated banks to implement digital solutions for supply chain finance (SCF) within six months. This initiative aims to improve SMEs’ access to finance and digitize retail payments. Moreover, the circular requires banks to establish robust Digital Supply Chain Finance functions with trained staff and systems to offer digital SCF products.

SBP Instructs Banks To Adopt Digital Supply Chain Finance Solutions

Banks are encouraged to develop their own digital solutions. Otherwise, they can partner with fintech and service providers. These digital SCF solutions are anticipated to increase SMEs’ access to finance, improve operational efficiency, reduce costs, and improve risk management practices.

In addition, the State Bank of Pakistan (SBP) announced its first key interest rate cut in almost four years yesterday. SBP will reportedly reduce the interest rate by 150 basis points to 20.5%. SBP made this decision just ahead of the budget announcement. It aims to promote economic growth in response to a sharp decline in retail inflation. As per sources, the inflation dropped to a 30-month low of 11.8% in May. It encouraged the SBP’s Monetary Policy Committee (MPC) to underscore that the recent inflation rates have been better than expected, aligning with earlier expectations of a substantial decline since February.

The Committee stated that underlying inflationary pressures are declining due to a strict monetary policy and fiscal consolidation. This marks the first instance in four years, since June 25, 2020, that the SBP has initiated monetary easing. The central bank’s last adjustment took place during an emergency meeting in late June last year.

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