Banks in Pakistan have long faced structural limitations in serving small borrowers dispersed across rural and semi-urban regions. Extending credit to smallholder farmers and micro or small enterprises has traditionally been considered high-risk and costly. As a result, access to formal credit has remained limited for millions. However, digital transformation in the banking sector is beginning to reshape this landscape. The integration of digital technology into credit processes is enabling banks to expand financial inclusion by making lending faster, more secure, and scalable. This shift has contributed significantly to the growth of small and medium enterprise (SME) financing and agriculture credit over the past fiscal year.
According to recent data from the State Bank of Pakistan, SME lending increased by nearly 41 percent to Rs690.98 billion in FY25, up from Rs491 billion the previous year, with the number of borrowers rising by 56 percent to 276,593. Similarly, agriculture credit grew by 16.3 percent, reaching Rs2.58 trillion from Rs2.21 trillion, while the number of borrowers expanded by 9 percent to 2.95 million. These trends point to a new phase of digital-driven expansion. Zafar Masud, President and CEO of Bank of Punjab (BOP), credits the adoption of digital lending models for this progress. He explains that digitising the entire lending process—from application and verification to credit approval and disbursement—has removed longstanding structural barriers that previously restricted formal credit access for farmers and small enterprises.
BOP has emerged as one of the leading institutions in driving this transformation. Under its Kisan Card and Karobar Card schemes, the bank has digitised end-to-end loan processing, making the system faster, more transparent, and easier for customers to access. In the first crop cycle, the bank approved nearly 550,000 loans worth Rs55 billion, with around 392,000 borrowers utilising Rs37 billion for agricultural inputs. The recovery rate stands at 96.4 percent—significantly above the industry average. According to Nofel Daud, BOP’s Chief Digital Officer, scaling agriculture and SME lending through traditional methods would not have been feasible without digital tools. The bank has also added between 500,000 and 600,000 first-time borrowers to its customer base, creating new credit histories and enabling financial inclusion for segments that had previously been excluded from the formal banking system.
The shift toward digital lending, however, goes beyond customer-facing interfaces. The real innovation lies in back-end systems, particularly automated underwriting and approval processes that ensure efficient and secure decision-making. Mr Daud explains that each digital lending model must adapt to the realities of its borrower segment. For instance, the fully digital Kisan Card process allows farmers to apply and receive disbursements without visiting a branch, while the Karobar Card is physically delivered to business owners’ premises to suit their operational needs. The flexibility of these digital models ensures relevance across varied borrower profiles.
To sustain this progress, collaboration with external partners has become essential. BOP’s digital lending framework relies on a network that includes fintech companies, data registries, and government bodies such as the National Database and Registration Authority (NADRA), Punjab Land Revenue Authority, meteorological department, and credit bureaus. These partnerships provide crucial data for borrower verification and risk assessment. The bank has also introduced psychometric testing developed by a British firm to better assess borrower intent and repayment capacity and is now working with a Singapore-based firm to train AI-driven credit decision models.
While the digitalisation of lending holds immense promise, experts agree that scaling these innovations requires continued institutional and policy support. As Mr Masud notes, it is the alignment between digital infrastructure and government initiatives that has made expansion in SME and agriculture financing possible. Pakistan already possesses the technical infrastructure and digital platforms needed for such transformation; the next step lies in accelerating adoption. For banks, the challenge now is to make digital solutions not just available but indispensable to the lending process—ensuring financial inclusion grows hand in hand with innovation.
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