Comment: Missing link to financial inclusion

LAHORE: Financial inclusion nowadays is a policy buzzword in Pakistan, but one of its most important pillars remains underdeveloped: the credit bureau system. Around the world, credit bureaus form the backbone of modern lending.

They allow banks and microfinance institutions to assess risk accurately, extend low-value loans profitably and let new borrowers build a verifiable credit history. When these systems work well, more people borrow, more lenders compete, and capital flows towards productive households and businesses instead of remaining trapped in informal credit networks.

At its core, a credit bureau collects information on individuals’ borrowing, repayment patterns, outstanding loans, defaults and even non-traditional behaviours such as utility payments, telecom bills or rental histories. This aggregated record becomes the borrower’s ‘reputation’ in the financial system. A person with consistent on-time payments can obtain cheaper loans in the future, enabling the kind of upward mobility many countries achieved by digitising and formalising their credit information over the past three decades.

Pakistan does have a credit-reporting architecture, but it remains shallow and incomplete. The State Bank of Pakistan operates the Electronic Credit Information Bureau (eCIB), a central repository where banks, DFIs and microfinance institutions are required to report. Alongside it, two private credit bureaus licensed by the SBP — DataCheck Limited and the more consumer-facing Tasdeeq — also collect data and generate credit reports and scores.

In this regard what matters is whether the methodology is sound, regulated, and statistically aligned with local lending conditions. On that front, Pakistan’s private bureaus are respectable and follow recognised standards, but they are only as strong as the data they receive.

Pakistan’s credit-bureau ecosystem cannot map the creditworthiness of most citizens simply because there is too little data to map. Despite millions of CNICs and a large population, the financial footprint of the average Pakistani remains narrow. When people do not use formal credit channels or digital payments, they generate no record that a bureau can capture.

Data reporting remains fragmented. Banks report to eCIB, but not all financial institutions report consistently to private bureaus. Telecom companies, utility providers, rental markets, agricultural lenders, informal service lenders and thousands of shop-credit networks do not systematically feed data into the system. When reporting is incomplete, a borrower’s positive behaviour — paying bills on time or maintaining a clean informal credit history — simply never appears on their record.

Data quality is another barrier. Errors in reported data, inconsistencies in formats, delayed updates and slow correction processes all undermine trust. The correction of a wrong or outdated entry currently depends on the reporting institution, not the bureau, resulting in long delays for consumers who need quick fixes to access credit.

A deeper challenge is Pakistan’s vast informal economy. Millions of households rely on unrecorded credit — advances from shopkeepers, agricultural input loans, instalment purchases of appliances, and community-based lending. These transactions represent real credit behaviour, but they are invisible to the formal bureau system.

Identity integration has improved with NADRA, yet operational linkages across all sectors — utilities, mobile wallets, micro-lenders, housing and rental markets — remain incomplete. Building these linkages requires technology, safeguards, and shared standards, all of which take time and political will.

There are commercial hurdles too. Collecting, cleaning and maintaining high-quality data is expensive. Smaller lenders and non-bank financial players often resist mandatory reporting, viewing it as an added cost rather than a long-term investment in a healthier credit system.

Finally, cultural concerns around privacy and data misuse persist. Without robust data-governance legislation, public trust in credit bureaus will remain limited.

Yet the solution is fully within reach. Pakistan can dramatically enhance credit mapping by broadening data sources to include utilities, telecom payments, rental records and digital transactions — with strict privacy safeguards.

If Pakistan wants real financial inclusion — not just slogans — it must strengthen its credit infrastructure. A well-functioning bureau system does not merely help banks; it empowers individuals, creates economic mobility, and brings millions into the formal financial system. Without it, inclusion will remain a distant goal, and credit will continue flowing only to the already visible.