Microfinance on the verge of collapse

Pakistan’s financial services landscape today looks vastly different from what it used to be a decade or two ago. At least in the urban areas, an average person even remotely linked to the formal net would be using some app, either to receive money from Bykea after doing a gig or a small shop owner whose customers want to pay digitally. Heck, they can even borrow a couple thousand rupees instantly from the same mobile application and pay back a week later. The credit for this lies squarely on two sets of regulations, first on microfinance and the second on branchless banking. But the former is in serious trouble, with no signs of reprieve as yet. For more than half a decade, microfinance banks have been incurring net losses. Initially, it was just one player having an outsized influence on the aggregate numbers, but the rot has deepened and continues to spread.