June is the time of the year when the Ministry of Finance reflects on the past performance through the Pakistan Economic Survey and presents a forward-looking plan through the Federal Budget. Taken together, a complete picture of the economy emerges; the journey over the past year and the horizon over the immediate future.
The economic performance over the past year was marked by stability - stability without any spectacular growth. There was promise of growth but not without difficult reforms. Economic growth is moderate, reserves are steady and inflation is tempered. Remittances were the highlight and at a record high, but exports have remained stagnant. Glass half full or half empty; it depends on where one chooses to look.
The banking industry has been a partner in the government’s reform journey for decades. The sector has emerged as a strong pillar of the economy, an industry on which the government has relied countless times for its agenda on development and growth.
It is against this backdrop that the second annual Pakistan Banking Summit will take place. The Summit comes at a time when the economy is relatively stable but needs a well-planned concerted push towards a growth trajectory. Discussions at the summit will range from traditional areas such as SME finance, housing and agriculture to emerging themes including digital payments, priority sectors, digital currencies and climate finance. Taken together, these discussions reflect a broader question: how can the banking sector support Pakistan’s next phase of economic growth?
The summit should not be mistaken for another conference that produces more speeches than outcomes. Since the inaugural summit last year, measurable progress has been recorded across several priority sectors.
SME finance, which remained stagnant for years, has grown 54 percent in terms of borrowers and 46 percent in outstanding finance. SME lending now accounts for 7.63 percent of total private sector lending, an improvement from approximately 6 percent a year ago.
Overall, agricultural finance grew 14 percent year-on-year to Rs 995 billion. This area has seen momentum through the digital lending programme – Zarkhez-e. The programme has completed one lending cycle with recoveries underway. Over Rs 6.43 billion has been approved to 14,800 farmers. If scaled properly, this programme can reach millions of unserved farmers across the country.
Remittances in general, and specifically under the Roshan Digital Account, merit separate mention. Remittances for FY26 (up to May) reached USD 38.1 billion, with RDA contributing approximately USD 2.9 billion. With the introduction of RDA 2.0, business entities and non-Pakistani origin investors are now eligible. Recently, the government also announced that deposits can be held in Saudi riyals and UAE dirhams. The programme is still growing with nearly a million accounts to date. As of May, 84 percent of RDA funds remain in Pakistan with 64 percent utilized locally, spurring economic activity.
Housing finance faces a structural challenge at scale. Pakistan has a 10-million-unit housing shortfall, with 350,000 units needed annually but only 150,000 delivered. Housing accounts for 25 percent of core inflation, yet formal housing finance remains only 3–5 percent of GDP compared to 10–12 percent in India. The recently launched Apni Chhat Apna Ghar is showing good results with over Rs 200 billion disbursed and 99 percent recovery. The banking sector faces two structural constraints. First, in the absence of pension and insurance funds that can provide long-term capital through mortgage securitization, banks continue to face asset-liability mismatches with short-term deposits funding long-tenure housing loans. Creative solutions, including directing a portion of long-term RDA deposits towards housing finance, deserve consideration. Second, on the policy side, the absence of stronger foreclosure laws and digitization of land titling will continue to hamper the market despite the banking industry’s willingness to lend.
Climate finance presents a similar challenge. While the State Bank’s Green Banking Guidelines (2017) and Pakistan Green Taxonomy (2025) provide the governance and classification framework, embedding ESG into end-to-end banking processes (not just restricted to compliance and risk) remains elusive. For banks to deploy capital at scale for climate finance, green lending must remain commercially viable while enabling the state to access much-needed funding for adaptation and mitigation. Creative models in blended finance and de-risking instruments will need to be looked at carefully for meaningful headway to be made.
Pakistan has never been more financially included, reaching 69 percent of adults, with 6.8 million new unique accounts added during CY25. Digital transactions are also happening at a scale that has never been seen. However, the uncomfortable question of whether that is impacting currency in circulation and shrinking the cash economy is something that remains to be answered.
For this reason, and for such questions, the Banking Summit is more than just a conference. It is a platform that provides an important space to examine the banking sector’s priorities as it navigates the challenges and opportunities that lie ahead. Last year’s summit showed that outcome-based progress is possible. The challenge this year is to identify the foundations that will enable this progress to scale.
Copyright Business Recorder, 2026
The writer is Head Priority Sectors & Research – Pakistan Banks Association
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