Atif Bajwa’s distinguished career spans over four decades, marked by executive leadership roles in banking, corporate governance, and public interest initiatives. Beginning his professional journey with Citibank in 1982, he has held pivotal positions at some of the most prominent financial institutions, including President & CEO of Bank Alfalah, MCB Bank, and Soneri Bank. His international experience extends to serving as Regional Head of Citigroup for Central and Eastern Europe, Head of Consumer Banking for ABN AMRO’s Asia-Pacific region, and Country Manager of ABN AMRO Pakistan.

Beyond banking, Mr. Bajwa has played an influential role in shaping Pakistan’s economic and corporate landscape. He has led key advocacy institutions, serving as Chairman of the Pakistan Business Council (PBC) and President of the Overseas Investors Chamber of Commerce and Industry (OICCI). His contributions also extend to board memberships across various private and public sector companies.

He is a graduate of Columbia University, New York. Following are the edited excerpts of a recent conversation BR Research had with him:

BR Research: Let’s begin by discussing the broader banking industry in Pakistan. You have extensive experience in this sector, having worked with major banking institutions. How has the industry evolved over the years, and where do you see key challenges?

Atif Bajwa: The banking sector in Pakistan has seen significant transformation, particularly post-privatization. It is one of the most successful privatization efforts in the country’s economic history. As banks transitioned from state ownership to private management, their efficiency improved substantially. They became better capitalized, introduced more products, and contributed to economic growth. A major factor behind this success is the strong regulatory framework provided by the State Bank of Pakistan (SBP), which has been instrumental in maintaining the stability and robustness of the banking sector.

However, there are notable challenges. Over time, lending to the private sector has declined, and banks have increased their reliance on government securities. This shift is driven by several factors, including economic volatility, increased fiscal deficits requiring government borrowing, and the relatively slower growth of the private sector. While banks have been conservative in lending due to economic risks, they could have done more, particularly in supporting key economic areas like SMEs and agriculture. Additionally, structural weaknesses, such as a lack of legal enforcement for loan recoveries and inadequate incentives for risk-taking in new sectors, have hindered more aggressive lending strategies.

Another challenge is the increasing reliance on foreign currency borrowing due to a lack of long-term domestic funding sources. This leads to currency risks, particularly when exchange rate fluctuations impact the cost of servicing foreign debt. There is also a need for further digitization in banking services, financial inclusion efforts, and broader accessibility for underserved populations, particularly in rural areas.

Additionally, financial literacy remains a significant challenge. Many individuals and businesses lack awareness of how to optimize financial products and services. Banks must work alongside regulators and educational institutions to enhance financial awareness and responsible banking.

BRR: The industry’s reliance on government securities is often criticized. What factors drive this trend, and how can banks strike a balance between profitability and financial intermediation?

AB: Banks primarily have two options for deploying liquidity: lending to the private sector or investing in government securities. The increasing demand for government borrowing stems from persistent fiscal deficits. When a government spends beyond its revenue, it must finance the shortfall through either borrowing or printing money. In Pakistan, the primary domestic source of borrowing is the banking sector.

Private sector lending, on the other hand, has been constrained by economic instability, high interest rates, and the credit risks associated with volatility. Additionally, banks have not been proactive enough in targeting high-impact sectors such as SMEs and agriculture. Over the past few years, the advances-to-deposits ratio (ADR) dropped from 70% to the mid-30s before slightly recovering. This was largely due to inflation and high interest rates—when rates hover around 22-25%, borrowing becomes prohibitive, leading to decreased demand for credit.

Further, the uncertainty in business environments due to fluctuating policies, a weak judicial system for contract enforcement, and lack of sufficient long-term capital markets make banks reluctant to commit to long-term private sector lending. The challenge is to ensure a gradual rebalancing where banks feel secure enough to shift some of their investments from risk-free government securities to growth-oriented private sector lending.

To address this, banks need to diversify their investment portfolios, participate in public-private partnerships, and leverage fintech solutions to mitigate risks. Additionally, the government should work on fiscal discipline to reduce its borrowing needs, which in turn would encourage banks to allocate more funds to private-sector lending. Encouraging development finance institutions (DFIs) and alternative funding sources, such as venture capital and private equity, can also provide a more balanced financial landscape.

BRR: Project financing has been largely absent in Pakistan over the past 15 years, aside from IPP and fertilizer projects. Why do banks hesitate to fund long-term initiatives, and what needs to change?

AB: The ecosystem supporting long-term financing in Pakistan is weak. Banks face structural constraints, as their deposit base is predominantly short-term. This makes it difficult to provide long-term loans without creating asset-liability mismatches. Additionally, foreclosure laws are weak, and judicial inefficiencies make debt recovery challenging.

That said, some positive developments are taking place. For instance, Punjab has digitized land records, making it easier to use property as collateral. The government has also introduced risk-sharing mechanisms to encourage lending to SMEs and entrepreneurs. However, the absence of a well-functioning bond market and pension funds limits the scope for large-scale project financing.

For sustainable long-term project financing, Pakistan needs an active corporate bond market, pension funds, and sovereign wealth funds to take on long-term risks. Banks should also consider syndicate lending models where multiple financial institutions collaborate on large-scale projects to distribute risk more effectively.

Additionally, banks must focus on specialized lending instruments, such as green bonds and infrastructure bonds, to support long-term, high-impact projects. Partnering with international financial institutions for long-term funding solutions can also help mitigate local funding limitations.

BRR: Why has SME borrowing diminished over the years, and what steps can be taken to encourage lending to small businesses?

AB: SME lending has suffered due to weak foreclosure laws, inconsistent financial documentation, and limited credit risk assessment models. Many small businesses operate in the informal economy and do not maintain structured financial records, making it difficult for banks to assess their creditworthiness.

To address this, digitization and AI-driven credit scoring models are being introduced. Additionally, the government has stepped in with credit risk-sharing schemes to encourage lending to SMEs. Banks are also focusing on supply chain financing, where lending decisions are based on a business’s transactions and cash flows rather than just collateral.

Moreover, financial literacy programs and targeted banking products for SMEs can increase participation and formalize business transactions, making it easier for banks to extend credit in a structured manner. Policymakers should also focus on simplifying business registration and taxation procedures to encourage small businesses to operate within the formal economy, thereby improving their creditworthiness.

BRR: Finally, tell us about the upcoming Pakistan Banking Summit. What are its key objectives?

AB: The Pakistan Banking Summit, scheduled for February 24-25, aims to foster discussions on the banking sector’s role in economic development. Key topics include digital banking, SME and agriculture financing, sustainability, and human capital development.

We have invited 32 speakers, including 12 international experts, to share insights and best practices from around the world. The summit will also address major industry trends, such as the transition to Islamic banking and strategies to reduce cash dependency. The event will provide a platform for policymakers and banking professionals to align strategies to strengthen the financial sector for the coming decade.

Beyond these discussions, a significant focus will be on the future of banking in Pakistan—how financial institutions can integrate with fintechs, leverage AI for better decision-making, and implement ESG (Environmental, Social, and Governance) principles in their operations. The banking industry must play a proactive role in driving economic growth while ensuring financial inclusion for all sectors of society.

Additionally, the summit will focus on the need for greater financial transparency, enhanced regulatory cooperation, and the importance of sustainable banking models. Discussions will also explore the potential of blockchain technology in banking, cross-border remittance solutions, and the role of Islamic finance in fostering financial inclusion and economic stability.