Credit guarantees for women, farmers, and small businesses should be at least 50 percent. Microfinance markup should be reduced by 6 percent below KIBOR
President of the Pakistan Businessmen and Intellectuals Forum (PBIF) and All Karachi Industrial Alliance, Chairman of the National Business Group Pakistan, Chairman of the FPCCI Policy Advisory Board, and former Provincial IT Minister, Mian Zahid Hussain has said that the microfinancing in Pakistan has become a most wanted pillar for the economic revival of low-income segments, the financial inclusion of women, poverty alleviation, and meeting the credit needs of small businesses. However, insufficient capital, unequal regional distribution of loans, and higher markup rates compared to commercial banks are restricting its true potential. To make microfinance a genuine catalyst for economic transformation, it is imperative to strengthen its capital base and align regulatory requirements with international standards suitable to indigenous needs.
Mian Zahid Hussain noted that according to the Pakistan Economic Survey 2025-26, the microfinance industry’s gross loan portfolio stood at Rs 858.50 billion by December 2025, with 13.39 million active borrowers. The country had a network of 4,145 branches operated by 11 Microfinance Banks (MFBs) and 26 Non-Banking Microfinance Companies (NBMFCs). According to State Bank of Pakistan (SBP) data for March 2026, the total assets of MFBs alone were Rs 1,165.22 billion, deposits stood at Rs 886.42 billion, and outstanding consumer loans were Rs 530.16 billion. Despite these figures, expanding credit access for employment-generating activities remains a pressing need.
He highlighted that in March 2026, MFBs provided Rs 276.25 billion to the agriculture, forestry, and fishing sectors, whereas the manufacturing sector received a meager Rs 4.08 billion. This clearly indicates that cottage industries, small-scale factories, and value-addition sectors are not receiving the required attention. Discussing provincial distribution, he pointed out that Punjab received Rs 300.54 billion, Sindh Rs 120.57 billion, and Balochistan a mere Rs 7.19 billion. Such a highly unbalanced distribution will continue to limit investment and employment opportunities in marginalized areas. He stressed the need to introduce region-specific lending targets and simplified documentation requirements.
Mian Zahid Hussain expressed concern over the findings of the SBP’s Financial Stability Review 2025, and noted that in December 2025, the Non-Performing Loans (NPLs) of MFBs stood at Rs 48 billion (an infection ratio of 9.1%), while the overall Capital Adequacy Ratio (CAR) was a negative 1.2 percent—drastically lower than the SBP’s mandatory requirement of 15 percent. Four out of the eleven MFBs failed to meet the minimum capital requirement. Although the sector’s annual pre-tax loss narrowed from Rs 25 billion to Rs 2 billion, this improvement is not proof that the risks have subsided. The rehabilitation of weak banks, transparent monitoring, and the absolute protection of public deposits must remain top priorities.
Mian Zahid Hussain welcomed the SBP’s September 2026 initiative offering a 25 percent credit guarantee facility for women but termed it insufficient, demanding it be raised to at least 50 percent. Similarly, while appreciating the October 2026 decision to provide up to 20 percent risk coverage for small farmers and micro-businesses, he urged the government to increase this coverage to 50 percent. Alongside this, he demanded a substantial increase in lending volumes and a 6 percent reduction in the microfinance markup rate relative to KIBOR. Microfinance must be decisively redirected from personal consumption toward production and self-employment, as the national economy will only find solid footing when the fruits of development reach the small business community and the rural population.