Nano loans — financial inclusion or debt trap?

Pakistan suffers greatly from financial exclusion. The total individual lending by all providers, including commercial banks, microfinance banks, and non-bank financial institutions (NBFIs), is approximately 15 million in a country of 225m. This is staggeringly low. The biggest culprits are the commercial banks. While the commercial bank industry is hugely profitable, the earnings are generated by lending to the government, as opposed to the private sector, especially consumer lending. On this issue, the Ministry of Finance, the State Bank of Pakistan (SBP) and the board/owners are equally culpable. Given the imbalance between the tax receipts and government expenditure, the role of the State Bank and the gravy train offered by treasury bills, Pakistan investment bonds and commodity lending, the commercial banks’ investment behaviour is not expected to change. In fact, their consumer lending, consisting of credit cards, personal loans, auto loans and mortgages, makes up less than 2.5m active loan customers. Where do individuals go in this scenario?