At a time when Pakistan’s banking sector is facing mounting public criticism, the head of the Pakistan Banks Association (PBA) has chosen to confront the concerns head-on. In a rare public statement that deviates from the typical defensive rhetoric of most industry lobbies, PBA Chairman Zafar Masud acknowledges that while some criticisms are legitimate, others need greater context—and that the banking industry deserves a fairer hearing in the national discourse.
Masud delivered his remarks originally at the inaugural Pakistan Banking Summit held in Karachi on February 23, 2025. The speech, now adapted for publication, outlines a data-backed response to what he describes as six major criticisms routinely aimed at banks in the country.
Before delving into specifics, Masud sets the stage with some key facts that underscore the scale and importance of the banking sector in Pakistan’s economic framework. “Pakistan’s banking sector is the country’s largest taxpayer. We finance nearly 100% of the government’s budget deficit. We employ more than 200,000 people—many from diverse backgrounds—and we are among the most inclusive employers in the country,” he says.
Yet, despite this track record, banks are often portrayed in a negative light—particularly as “rent-seekers” who profit off state borrowing without contributing to the private sector or broader economic development. According to Masud, this perception is not just unfair but potentially harmful to the public understanding of how modern financial systems operate.
Masud identifies six major criticisms that frequently surface in media and policy circles:
- Banks actively lobby the government to avoid taxation.
- They prioritize government lending over private sector development.
- They offer minimal support to small businesses and agriculture.
- They have failed to significantly improve financial inclusion.
- They contribute little to national economic dynamism.
- They are lagging in transitioning to Islamic finance models.
While Masud does not dismiss these concerns, he presents a more nuanced take. For instance, on the issue of government lending, he argues that while sovereign lending forms a significant part of banks’ portfolios, this is largely a reflection of macroeconomic realities. “Banks go where the risk is manageable and returns are reasonable. In a high-risk environment, government securities are a rational choice,” he explains.
On the topic of small and medium enterprise (SME) lending and agriculture financing, he agrees that the sector must do more. However, he points to recent initiatives and partnerships aimed at expanding outreach to underserved sectors, especially through digital channels and financial technology collaborations.
Masud also acknowledges the lag in adopting Islamic finance but notes that a transition of this scale requires regulatory clarity, consumer education, and systemic reform. “Progress is happening, just not at the pace everyone desires. But the direction is clear,” he adds.
Perhaps most notably, Masud stresses that the banking industry is open to criticism but asks for a more informed and balanced dialogue. “It’s easy to paint banks as villains, especially in tough economic times. But without a functioning banking system, there is no economy. We are not perfect, but we are evolving—and we are listening.”
As fintech disruptors, policy shifts, and economic volatility continue to reshape the global financial landscape, Pakistan’s banks, too, find themselves at a crossroads. Whether they emerge as resilient enablers of economic growth or remain mired in perception battles may depend on how effectively they can both reform and communicate their value to the nation.