Aurangzeb urges microfinance sector to shift to cashflow-based lending

Finance Minister Muhammad Aurangzeb on Wednesday urged the microfinance sector to shift towards cashflow-based lending and make greater use of alternative data and digital credit scoring to expand access to finance for small businesses and farmers.

“Within the context of microfinance as well, we need to move towards cashflow-based lending, rather than always focused on collateral,” said Aurangzeb, while speaking virtually at the 10th Annual Microfinance Conference organised by the Pakistan Microfinance Network at Karachi.

“I would look forward to your deliberations and your suggestions after the next couple of days.”

Aurangzeb also urged microfinance institutions to focus on bringing new borrowers into the financial system, particularly in the agriculture and small-business sectors, rather than measuring performance only by lending volumes.

Aurangzeb said the government had also increased the export refinance limit to Rs1.5 trillion from Rs1 trillion, with 20% of the facility earmarked for small and medium-sized enterprises.

The minister said Pakistan’s foreign exchange reserves had reached a record $21.4 billion, equivalent to about three months of import cover, while the economy was expected to grow by more than 4% in the current fiscal year.

He said the government would continue structural reforms in taxation, energy, state-owned enterprises, privatisation and public finances, while seeking to make recent macroeconomic stability permanent and avoid a return to the country’s traditional boom-and-bust cycle.

Pakistan has made significant progress towards achieving economic stability over the past two and a half years, said the finance minister.

Pakistan’s sovereign credit rating has improved three times since April 2025, he added.

Strengthening economic stability on a sustainable basis is essential for durable economic activity and breaking out of boom-and-bust economic cycles, said Aurangzeb.

In the next phase, the focus will have to shift towards sustainable and responsible economic growth rather than consumption-driven expansion, said the finance minister.

The government is committed to further increasing the role of the private sector in economic activity, said the finance minister.