Economist calls for cash flow lending, equity finance as economies shift to intangible capital
State Bank of Pakistan. Photo: File
KARACHI:
The State Bank of Pakistan (SBP) hosted the 25th Zahid Husain Memorial Lecture in Karachi, featuring a keynote address by renowned economist Professor Amir Sufi, according to an official statement issued on Monday. The lecture series honours the legacy of Zahid Husain, the SBP’s first Governor, and brought together diplomats, academics, banking industry leaders, and members of the business community to discuss the evolution of financial systems in an era of high-tech growth. Professor Sufi, the Bruce Lindsay Distinguished Service Professor at the University of Chicago and a recipient of the 2017 Fischer Black Prize, focused his lecture on the structural transformation of modern economies. He said global markets are increasingly shifting toward high-tech services, including information technology and professional scientific services, requiring a fundamental change in how financial systems operate.
Sufi noted that these sectors rely heavily on intangible capital such as research and development, data, and specialised knowledge. Traditional banking models, which depend largely on physical collateral and liquidation values, are often unable to finance such firms effectively. As a result, innovative businesses whose worth lies in their continuation value rather than physical assets struggle to access credit.
To address this gap, Sufi emphasised the importance of financial intermediaries that specialise in intangible capital. He highlighted the role of cash flow-based lending and external equity financing, including venture capital and private equity. For countries like Pakistan, he said regulators must work together to create an enabling environment for high-growth sectors. This includes developing an efficient bankruptcy framework.
