Pakistan’s quest for financial inclusion has taken a bold new turn with the State Bank’s latest National Financial Inclusion Strategy (NFIS) for 2024-2028. Yet this ambitious roadmap, aimed at bridging the gap with regional peers in financial services access, arrives at a peculiar moment – one where its primary vehicle, the microfinance sector, stands on increasingly shaky ground.
The numbers tell a troubling story. While the first half of 2024 saw microfinance banks’ deposit base grow by 6.7% to Rs. 637 billion, loan portfolios barely moved, inching up just 1.4% to Rs. 413.8 billion. More alarming is the sector’s infection ratio, which surged from 6.6% to 10.5% since the end of 2023. Losses have mounted to Rs. 12.1 billion, up from Rs. 8.1 billion, while the sector’s equity base has contracted sharply from Rs. 37.4 billion to Rs. 22.6 billion. Perhaps most concerning is the Capital Adequacy Ratio’s (CAR) fall to 5.7% – well below the regulatory requirement of 15%.
This stark contrast – between ambitious policy and ground reality – raises a crucial question:
How did a sector meant to be the cornerstone of Pakistan’s financial inclusion journey end up in such dire straits? The answer lies in a complex web of factors, which we’ll unravel in this analysis. The content in this publication is expensive to produce. But unlike other journalistic outfits, business publications have to cover the very organizations that directly give them advertisements. Hence, this large source of revenue, which is the lifeblood of other media houses, is severely compromised on account of Profit’s no-compromise policy when it comes to our reporting. No wonder, Profit has lost multiple ad deals, worth tens of millions of rupees, due to stories that held big businesses to account. Hence, for our work to continue unfettered, it must be supported by discerning readers who know the value of quality business journalism, not just for the economy but for the society as a whole.To read the full article, subscribe and support independent business journalism in Pakistan
