akistan’s microfinance sector continues to evolve. There is still a lot of room for improvement. Several lending organisations have emerged as a transformative force dedicated to promoting financial inclusion and fostering sustainable development.

After Bangladesh and elsewhere, microfinance has proved to be a transformative lynchpin in Pakistan, helping poor families earn their livelihoods and providing them crucial support.

After the inception of Grameen in Bangladesh, the first formal microfinance bank in the world, in 1984, microfinance has been recognised as an important tool for poverty reduction. Grameen Bank’s success in providing for the financial needs of the poor in the society on a sustainable basis, made the bank a role model for private and public sector institutions in other countries.

Established with the mission of bridging the gap between commercial funding and microfinance, many organisations have played the important role over the years.

Organisations like the Pakistan Microfinance Investment Company, for instance, which grew out of the success of the Pakistan Poverty Alleviation Fund, have garnered significant international support in providing funding to microfinance institutions while also working to stimulate growth across sectors, such as enterprise, micro insurance, education, agriculture and renewable energy.

PMIC chief executive officer, Yasir Ashfaq, says he believes in an effort that results in, “a Pakistani society where the underserved are empowered.”

Guiding principles like these target key demographics, including women, youth, and rural communities, who often have limited access to financial resources.

Ashfaq says he envisions a future where microfinance addresses the vast unmet needs of millions in Pakistan. “While approximately 10.5 million clients currently benefit from microfinance services, the potential market is much larger, almost 41 million. Our strategy emphasises the pivotal role that economic support for small businesses can play in driving job creation, which is essential for stabilising the economy amidst high unemployment rates and economic challenges.”

There is a need for commercially sustainable funding sources, as philanthropic support alone is insufficient to meet the growing demand in the sector.

According to a report of the State Bank of Pakistan, “Microfinance has started gaining importance, as a tool of social mobilisation and poverty reduction, since late 1990s. Indeed, the enhanced international emphasis, in particular the increased funding from IFIs, encouraged both public and private sector to develop microfinance sector in the country.”

“The aim should be, and we are working in that direction through our three-year strategy, to expand Pakistan’s microfinance infrastructure through new financial products and capital raised from international impact investors,” Ashfaq says. He adds, “We should be able to extend the network by adding around 15 new institutions, particularly in underserved areas, such as Gilgit-Baltistan, Balochistan and Khyber Pakhtunkhwa, where local microfinance institutions have untapped growth potential.”

An important area of focus of microfinance is agriculture, a sector highly vulnerable to the impacts of climate change. We should be working to provide small farmers with accessible financing and assistance to help them adapt and thrive.

The PMIC is prioritising initiatives in affordable housing, renewable energy solutions and low-cost private schooling, underscoring its comprehensive approach to sustainable development and achieving the SDGs.

Ashfaq says, “Youth empowerment remains a critical aspect. The organisation supports 1,000 low-cost private schools, which are complemented by teacher training programmes and administrative assistance. In collaboration with Opportunity International, an organisation with a presence in Africa and South Asia, we are working to enhance educational infrastructure in 5,000 schools over the next three years, ensuring that Pakistan’s youth — future leaders and key contributors to social stability — are equipped with the tools they need to succeed,” he adds.

The microfinance sector in Pakistan needs to develop further. There is a lot of room to increase the financial services to the poor and the vulnerable. The government should acknowledge the importance of microfinance in social mobilisation and poverty reduction and increase its efforts to provide support to the relevant stakeholders.

Ashfaq says a blended finance approach includes provision of grants, training and capacity-building initiatives; investment in management information systems; and staff development for partner institutions as well as end clients.

Collaboration with key government bodies, such as the State Bank of Pakistan and the Securities and Exchange Commission, strengthen an organisation’s position as a leading advocate for financial inclusion. By aligning their objectives with the UN Sustainable Development Goals, microfinance organisations are not only advancing their mission but also contributing to Pakistan’s broad development agenda.

The success of organisations working in the microfinance sector lies not just in their ability to support individual businesses, but also in their broader role in building a resilient and sustainable microfinance infrastructure that can drive long-term growth and stability for Pakistan.

The writer is a researcher based in Islamabad