Finance Minister Urges Microfinance Sector To Adopt Cashflow-Based Lending
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✧ GENERATE BRIEFING
Federal Minister for Finance and Revenue Muhammad Aurangzeb has called upon Pakistan’s microfinance sector to pivot away from heavy collateral reliance and adopt cashflow-based lending models supported by alternative data and digital credit scoring. Delivering a virtual address at the 10th Annual Microfinance Conference organized by the Pakistan Microfinance Network in Karachi, Aurangzeb emphasized that microfinance institutions (MFIs) must focus on evaluating actual borrower affordability, seasonal cash patterns, and long-term financial inclusion rather than measuring success purely by loan disbursement volumes. Highlighting broader macroeconomic consolidation, the finance minister noted that Pakistan's foreign exchange reserves have scaled a record $21.4 billion (providing nearly three months of import cover), while the economy grew by 3.7% in the previous fiscal year with projections exceeding 4% for FY2026–27. To stimulate underserved segments, Aurangzeb pointed to recent structural steps, including expanding the export refinance limit to Rs1.5 trillion (with 20% earmarked for SMEs).
Finance Minister Muhammad Aurangzeb has urged Pakistan’s microfinance sector to move towards cashflow-based lending instead of relying primarily on collateral, calling for greater use of alternative data and digital credit scoring to expand access to finance.
Addressing the 10th Annual Microfinance Conference organised by the Pakistan Microfinance Network in Karachi, Aurangzeb said microfinance institutions should develop lending models that assess borrowers’ actual cash flows and repayment capacity.
The finance minister also called on microfinance institutions to focus on bringing new borrowers into the formal financial system, particularly small businesses and farmers, rather than measuring their performance only through the volume of loans disbursed.
Aurangzeb emphasised that stronger cooperation between commercial banks and microfinance institutions was needed to increase financing for SMEs, agriculture and affordable housing. The government has been pursuing broader measures to expand formal credit to underserved segments of the economy.
Expanding Credit and Refinance Facilities
He said the government had increased the export refinance limit to Rs1.5 trillion from Rs1 trillion, with 20% of the facility earmarked for SMEs, creating additional financing capacity for smaller businesses.
The minister also highlighted progress under a collateral-free financing scheme for small farmers, saying around Rs6 billion had been approved and more than Rs2 billion disbursed over the previous seven to eight months.
Macroeconomic Stability and Growth Outlook
Aurangzeb said Pakistan’s foreign exchange reserves had reached $21.4 billion, providing around three months of import cover. He added that the economy grew by 3.7% in the last fiscal year, while growth of around 4% is projected for the current fiscal year.
He reiterated the government’s commitment to structural reforms and sustainable economic growth, stressing that Pakistan needed to avoid a return to its traditional boom-and-bust cycle. Expanding access to finance and strengthening private-sector activity are central to the government’s strategy for achieving more sustainable growth.
