Pakistan is a developing nation with much potential but has a long way to go. In 2022, due to unprecedented floods and economic challenges, many businesses were shut down, and people lost their sources of income. Around 5.8 to 9 million people were pushed into poverty. The vicious spiral of poverty plagues generations once it takes a grip. In an emerging and undocumented economy like Pakistan, investment is needed to make a source of income for the people. For the future generation to prosper, investment in education is needed, and for any business to start, funds must be available for stocks and supplies. The most proportion of the income of people goes to household expenses and medical care. No business can be run without some investment; hence, digital lending can provide a solution to a revolution in Pakistan’s business sector.
Poverty is not a new challenge for Pakistan. Inspiration should be taken from countries like China which have set examples for taking their population out of poverty. China relied heavily on digital technology and connected its population to e-commerce. The key catalyst of income stability was mobile phone penetration, online connectivity, and online and digital payments. Pakistan can follow the same path as the digital footprints can solve the problem of undocumented data. By providing credit to people through digitalisation, poverty can be reduced at a large scale and serve as the most effective way. Pakistan is working towards a digital revolution, and approximately 80% of adults have access to an internet connection and mobile phones.
Only 2 per cent of the population can get loans from financial institutions as they use traditional methods to collect documents and provide funds. It is a time taking process which can be transformed by using digital technology, through which lending can get much more convenient, leading to more loans which people can use to start their businesses. Once payments are documented, both lenders and borrowers will be responsible. Currently, the risk is high as everything goes undocumented, and people have to pledge their tangible assets to give the guarantee.
To solve this problem, the recent influx of capital into start-ups has led to the growth of many new financial technology companies. Government should invest more in such companies to digitise and establish trustworthiness among people and companies. The salary information, sales receipts and supply purchase data must be digitally documented for improved efficiency. Digital lending at a small scale will significantly impact the economy, standard of living and employment as five million micro and small businesses are stuck in stagnant cash flow. By using fin-tech and digital lending, a revolution will be seen in businesses in Pakistan.