Zafar Masud Speech at PSIB Signing Ceremony
Mr. Zafar Masud (President & CEO-BOP) addresses the Pakistan Skills Impact Bond (PSIB) signing ceremony – empowering skills for a brighter tomorrow!
See also: Zafa Masud at the Launch of first-ever private-capital-funded PSIB
Zafar Masud’s Role in the Pakistan Skills Impact Bond
Zafar Masud, the President and CEO of the Bank of Punjab (BOP), is highlighted as a key private sector leader driving the strategic implementation of the Pakistan Skills Impact Bond (PSIB). He provided a comprehensive strategic overview of how the PSIB functions within Pakistan’s rapidly evolving social impact financing landscape. His presence underscored the critical role of commercial banking in bridging the gap between private capital and public development goals.
Under Masud’s leadership, the Bank of Punjab has positioned itself as a pivotal player in this “pay-for-success” model. By participating in the launch and signing of the investor agreements, Masud emphasized that the banking sector is moving beyond traditional lending toward results-oriented social investments. His contribution focuses on ensuring the financial viability and credibility of the bond, helping to create a structure that attracts institutional investors while addressing the country’s urgent need for human capital development.
Introduction to PSIB and the “Pay-for-Success” Model
Mr. Masud introduces the PSIB as a Rs 1 billion structured instrument, privately placed and fully guaranteed by the Government of Pakistan. He explains that unlike traditional funding, this is a “pay-for-success” model where investors receive returns only when independent verifiers confirm successful job placements and sustainable employment. The Bank of Punjab acts as the risk investor and underwriter, providing the initial capital and taking on the performance risk to prove the model works.
The Critical Role of Government Support
He emphasizes that social sector projects rarely succeed without government backing, citing even advanced economies like the USA as examples. He thanks the Federal and Punjab governments for providing sovereign guarantees and interest-free financing, which are essential to building investor confidence and de-risking the pilot program.
Surge in Priority Sector Lending
Mr. Masud shares impressive growth statistics from the past year to show the private sector’s increasing engagement in priority areas. He notes a 56% increase in SME borrowers and a massive 200% increase in women entrepreneurs. Furthermore, for the first time in five years, the declining trend in agricultural borrowers has reversed, showing an 11% increase as the number of borrowers grew from 2.7 to 3 million.
Unique Structure Compared to Global Peers
While similar bonds have been used in neighboring countries, Masud highlights that Pakistan’s model is unique because the government acts as the Outcome Funder. This direct government involvement helps scale activities more quickly, reduces costs, and ensures tangible benefits for the public that are more efficient than conventional models.
Five Key Reflections on National Progress
He outlines why this facility is vital for Pakistan, starting with the shift to result-based finance that moves from funding activities to funding verified outcomes. This creates a new class of social impact investors through sophisticated capital markets. He also points to the importance of strategic partnerships with global entities like the British Asian Trust and FCDO to engage the Pakistani diaspora. Beyond the financial structure, the bond has a direct human impact by creating a pipeline to economic participation and increasing female inclusion in the workforce. Finally, he notes that this structure is replicable and can be applied to education, health, and climate change initiatives in the future.
Future Outlook and “Outcome Funders”
He warns his team and partners that the work has just started, as this pilot serves as a proof of concept. He reveals that several large international Outcome Funders are already lined up for future phases. By tapping into these resources, he expects the program to reach much larger numbers than the current commitment by the middle of next year.
Conclusion
Mr. Masud concludes by stating that when government, private sectors, and international partners unite for the public good, they forge a transformational legacy for Pakistan’s economic stability and inclusive growth.
The Dawn of Outcome-Based Finance: Understanding the Pakistan Skills Impact Bond (PSIB)
In a landmark move for Pakistan’s economic and social landscape, the government recently launched the Pakistan Skills Impact Bond (PSIB). Valued at Rs 1 billion, this initiative is not just another vocational training program; it represents a fundamental shift in how the state addresses human capital development. By leveraging private capital to solve public problems, the PSIB introduces the “Pay-for-Success” model to Pakistan, promising a more efficient, transparent, and results-oriented approach to governance.
What is the Pakistan Skills Impact Bond?
At its core, the PSIB is a Social Impact Bond (SIB)—a sophisticated financial instrument where private investors provide upfront capital for social services. Unlike traditional government spending, where funds are disbursed regardless of the quality of the outcome, the PSIB is outcome-based.
Under this model, the Bank of Punjab (BOP), led by President and CEO Zafar Masud, acts as the risk investor and underwriter. The bank provides the initial funding to training providers. These providers then train Pakistani youth in high-value digital skills, such as blockchain and advanced software development.
The “impact” part of the bond comes into play at the end: the government (the “Outcome Funder”) only repays the investors—with a return—once specific, independently verified results are achieved. These results include successful certification, job placement, and, most importantly, the retention of that employment for at least six months.
The Role of Zafar Masud and the Bank of Punjab
A central figure in this transformation is Zafar Masud. His leadership at the Bank of Punjab has been instrumental in bridging the gap between conservative commercial banking and high-stakes social impact.
Masud has championed the idea that banks must evolve. In his view, the PSIB is a “groundbreaking” tool that proves the private sector can manage performance risk more effectively than the public sector. By stepping up as an underwriter, Masud has provided the financial credibility necessary to launch a pilot of this scale, demonstrating that Pakistani banks can be catalysts for national stability rather than just repositories for deposits.
Why the PSIB is Significant
The significance of the PSIB extends far beyond the Rs 1 billion price tag. It addresses three of Pakistan’s most pressing challenges:
1. Turning the “Youth Bulge” into a Dividend
Pakistan has one of the youngest populations in the world. Without proper skills, this demographic reality is a social risk; with the right skills, it is an economic engine. The PSIB focuses on digital skills that allow youth to compete in the global “gig economy” and freelance markets, bringing much-needed foreign exchange into the country.
2. Fiscal Responsibility and Efficiency
Historically, public vocational training has been criticized for “spending without results.” The PSIB changes the narrative. Because the government only pays for successful employment outcomes, taxpayer money is protected. If the training fails to lead to jobs, the private investors bear the loss, not the state. This introduces a level of accountability and “skin in the game” previously unseen in the public sector.
3. Promoting Gender Inclusion
The PSIB is designed with a mandate for inclusivity, specifically targeting a 40% female participation rate. By focusing on digital skills that can often be practiced remotely, the bond helps bypass traditional barriers to women’s employment in Pakistan, ensuring that the country’s economic growth is inclusive.
A Scalable Blueprint for the Future
The PSIB is a collaborative triumph involving the Ministry of Finance, the National Vocational and Technical Training Commission (NAVTTC), the British Asian Trust, and the UK’s FCDO. However, the ultimate goal is for this to be a “Proof of Concept.”
As Zafar Masud has noted, if this pilot succeeds in the skills sector, the model can be replicated in healthcare, primary education, and climate resilience. It offers a roadmap for a future where the government moves away from being a direct service provider and instead becomes a “facilitator” that sets standards and pays for verified success.
Conclusion
The launch of the Pakistan Skills Impact Bond marks the beginning of a new era in Pakistani finance. It moves the country toward a more sophisticated, data-driven, and transparent economy. By aligning the profit motives of the private sector with the welfare goals of the state, the PSIB ensures that when the youth of Pakistan win, the investors win, and the nation prospers. It is a bold experiment in trust, accountability, and the power of human capital.