Pakistan’s banking sector has approved more than Rs400 billion in financing for affordable housing, but only around Rs76 billion, equivalent to approximately 19%, has been provided to first-time homebuyers. Finance Minister Muhammad Aurangzeb highlighted the gap on October 7 while addressing the Pakistan Microfinance Network’s 10th annual microfinance conference virtually. He said expanding access to finance remains one of the government’s six key priorities, alongside economic stability, sustainable growth, structural reforms, trade and investment, and preparing the country for the emerging economy.
Aurangzeb said Pakistan had made progress on economic stability during the previous two and a half years, with the country’s twin deficits declining from a peak of around 12.5% of gross domestic product to 2.6% by the end of the last fiscal year. Foreign exchange reserves had reached a record $21.4 billion, providing coverage for nearly three months of imports. According to the minister, Pakistan’s sovereign credit rating had improved three times since April 2025, while the successful issuance of a $3 billion Eurobond marked the country’s return to international capital markets. Investor participation from Asia, the Middle East, Europe and the United States, he said, reflected increased confidence in the economy.
The finance minister said Pakistan’s economy, which had contracted three years earlier, expanded by 3.7% during the last fiscal year, with growth of more than 4% expected in the current fiscal year. He stressed that the focus should remain on sustainable and responsible economic expansion rather than consumption-led growth. Taxation, energy, state-owned enterprises, privatisation and public finances remain key areas for structural reform. Aurangzeb also said the government wanted to increase the private sector’s role in economic activity, pointing to a joint bid of around $1.2 billion by two major domestic investor groups for Pakistan International Airlines as an indication of growing private sector confidence.
Private sector participation is also increasing in the power distribution segment, according to the minister. He said international investor interest in the privatisation of power distribution companies was growing, with three Turkish companies showing interest in the first distribution company offered for privatisation. Aurangzeb said Pakistan was moving from an aid-oriented model toward greater reliance on trade and investment, making stronger economic relationships with bilateral partners increasingly important for future growth.
The finance minister also highlighted the importance of preparing for technologies and business models associated with the emerging economy, including artificial intelligence, blockchain and Web3. He said Pakistani freelancers generated $1.6 billion from IT services exports during the last fiscal year. To increase the value generated by the digital economy, he stressed the need to improve existing skills while providing young people with training in new areas that can help them move into higher-value digital services.
Financial inclusion was another major focus of Aurangzeb’s address. He said around Rs6 billion had been approved and more than Rs2 billion disbursed through a digital, collateral-free financing scheme for small farmers during the previous seven to eight months. He called for stronger cooperation between commercial banks and microfinance institutions to expand access to financing for small and medium-sized enterprises, agriculture and affordable housing. The housing financing gap, particularly the limited share reaching first-time buyers, highlights the importance of ensuring that approved credit translates into actual access for households that have not previously owned homes.
Aurangzeb urged microfinance institutions to expand digital lending, improve customer experience and develop more effective credit-scoring models. He said lending decisions should increasingly incorporate alternative data and digital credit systems rather than depending primarily on collateral. Credit providers should assess repayment capacity, seasonal income patterns and affordability when evaluating borrowers. Such approaches could broaden access to formal financing for customers who may lack conventional collateral but have sufficient capacity to repay loans.
The minister also said the success of the microfinance sector should not be measured only by the number or value of loans issued. Instead, institutions should examine the economic and social outcomes generated by financing. These outcomes could include increasing the number of first-time borrowers in agriculture and small businesses, helping small enterprises expand into medium and large businesses, creating employment and improving women’s participation in economic activity. He said greater participation by women entrepreneurs would be particularly important for strengthening financial inclusion and creating sustainable livelihoods.
The government has also increased the export refinance limit from Rs1 trillion to Rs1.5 trillion, with 20% of the additional limit reserved for small and medium-sized enterprises. Businesses connected to the value and supply chains of major exporters will be able to access financing at a special rate of 4.5%. The measure is intended to widen access to export-linked financing and allow smaller businesses connected to larger exporters to participate more effectively in supply chains.
Aurangzeb said the continued development of digital finance, alternative credit assessment and collaboration between banks and microfinance institutions could help address financing gaps across housing, agriculture and small businesses. For affordable housing in particular, the difference between the more than Rs400 billion approved by banks and the roughly Rs76 billion reaching first-time buyers demonstrates that improving access and disbursement remains as important as expanding the headline volume of approved financing. The minister said discussions at the microfinance conference could contribute to strengthening the sector and expanding financial services for individuals, businesses and communities across Pakistan.
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