Millions remain outside the financial system—Pakistan cannot afford it

Pakistan is confronting a difficult economic situation. Years of inflationary shocks, macroeconomic instability, climate-related disasters, and weak employment growth have eroded household incomes, reduced savings, and pushed millions back into poverty.

According to estimates by the Ministry of Planning, Development and Special Initiatives, the poverty line is drawn at Rs. 8,484 per adult per month for 2024-25, using the “Cost of Basic Needs” approach. Accordingly, about one-third of the population is living below the poverty line, unable to earn sufficient income to meet their basic needs.

Further, the estimated poverty incidence is more severe in rural areas than in urban areas. Besides this, Pakistan has also witnessed a rise in income inequality, as the Gini coefficient rose to 32.7 in 2024-25 from 28.4 in 2018-19. Moreover, according to the 2024-25 poverty estimates, income inequality is more severe in urban areas than in rural ones. In this environment, strengthening household resilience has become as important as restoring economic growth. One policy instrument with enormous untapped potential is financial inclusion; however, financial inclusion alone is not enough in Pakistani society.

In this op-ed, the writer briefly outlines the financial access, usage, and wellbeing dimensions. Financial inclusion refers to ensuring that all segments of society—particularly low-income and vulnerable groups—have access to and can effectively use appropriate and affordable financial products and services, including credit, savings, insurance, and payment systems. Financial institutions collect such savings and mobilize them into productive businesses, increasing credit generation and boosting aggregate investment and economic development.

Nearly two-thirds of Pakistan’s adult population, approximately 133.3 million adults, remain unbanked or financially excluded, according to the Findex database 2025. Among the 1,000 respondents, 18.3 percent have a formal financial account, 18.3 percent have a mobile money account, and only 19.8 percent have a digital payments account. This implies that the majority of the population sits outside the financial system (Findex Survey 2025).

Because financial accounts are limited to only 27 percent of respondents, the financial usage of these accounts is also limited. Findex data revealed that 72.5 percent of the 318 respondents use their accounts on average once a month to withdraw or deposit money. A further 52.8 percent of respondents use these accounts to store money, 41.9 percent of the 318 respondents use them for savings, and only 19.7 percent use them for borrowing.

The usage statistics therefore reveal that financial usage is also limited to only one-third of the population. Moreover, this usage of financial accounts is limited to storing money and saving, rather than to personal and business borrowing or risk management. Therefore, the current state of financial access is unable to pave the way for the financial resilience and welfare of a broad spectrum of society.

The key message of this op-ed is that “financial accounts are necessary, but not sufficient on their own. Financial accounts create real value and wellbeing only when they are appropriately trusted, actively used, and supported by income opportunities, financial capability, and strong consumer confidence.”

Further, financial inclusion is acknowledged by the United Nations as a catalyst for achieving the developmental objectives of the Sustainable Development Goals (SDGs) under Vision 2030. It is therefore integrated into 8 out of the 17 SDGs, including no poverty, no hunger, health, gender equality, empowerment, job creation, innovation support, infrastructure development, and inequality reduction.

Financial inclusion is intended to make life better for everyone, especially for the underprivileged segments of society. Poor households that have formal financial accounts may obtain credit, make loans, pay premiums, borrow money, and safely store money outside the home through the use of bank accounts.

In this way, financial inclusion can serve as a fundamental tool for poverty mitigation and income inequality reduction worldwide. However, Pakistan lags far behind its neighbouring countries in using financial inclusion as a policy instrument.

The main barriers are the informal economy, low income, documentation requirements, accessibility, high transaction costs, and lack of trust. Besides these, there is a wide gap in financial account ownership between men and women, across levels of education, and between rural and urban residents.

Statistics reveal that although women comprise 50 percent of the adult population, their participation in the national labour force is very limited. These gender disparities in labour force participation, employment, and education are in fact a barrier to financial account ownership and its usage, which further exacerbates weak economic empowerment and gender inequality.

Digital financial services, specifically through mobile phone and internet usage, show a significant association with financial usage, but not with financial resilience and poverty eradication. The knowledge brief revealed that although the use of cell phones and the internet is penetrating household life, its use for formal financial accounts and for making digital payments is still lacking.

The digital account payments share is limited to only 1 percent, while in other lower-middle-income countries the digital account payments share has grown to 36 percent of adult accounts, according to the Global Findex Database 2025. Further, Findex survey data revealed that 23 percent of the individuals who are unbanked have smartphone access, and this smartphone access could easily transform them into financially included persons.

In the pre-COVID-19 phase, although the ICT sector had evolved and online banking and payment systems were already in place, there was reluctance to embrace ICT technology in day-to-day routine activities at the individuals’ end. The COVID-19 event broke this ice, and individuals started to adopt it forcefully.

Further, it is noted that coercive digitization can disadvantage people without smartphones, identification, connectivity, or digital skills. Therefore, the policy direction should instead emphasize incentives for digital payments; simple and low-cost account opening; assisted digital channels; interoperable agent networks; cash alternatives during the transition; fraud protection and rapid grievance redress; digital and financial literacy; and explicit safeguards for elderly, rural, and low-literacy users.

In this backdrop, the next phase of financial inclusion reforms should not focus merely on financial account ownership. Policies should focus on sharpening individuals’ skills and capabilities so that they can use financial products for their financial wellbeing.

This can be accomplished if we evolve financial inclusion from a banking objective into a national development strategy that promotes savings, encourages entrepreneurship, protects vulnerable households from economic shocks, expands opportunities for women and young people, and transforms the financial wellbeing of society.

If Pakistan succeeds in creating an inclusive financial ecosystem built on trust, accessibility, affordability, and productive economic opportunities, financial inclusion can become one of the country’s most effective tools for reducing poverty, narrowing inequality, and achieving sustainable and inclusive economic growth.

Copyright Business Recorder, 2026