Karachi – In a significant shift within Pakistan’s financial landscape, banks have lent a record Rs400 billion to non-bank financial institutions (NBFIs) in the first quarter of the current financial year (FY25). This surge in lending marks a pivotal moment for NBFIs, which play a crucial role in providing financial services outside traditional banking.
Key Highlights
- Lending Surge: From July 1 to October 11, banks provided Rs399.86 billion to NBFIs, representing 91% of the total loan stock for these institutions.
- Debt Retirement: NBFIs retired Rs71 billion in net debt in FY24, indicating a trend towards financial stabilization.
- Growth in Assets: The NBFI sector has expanded steadily, growing its asset base to Rs3,089 billion in CY23, a 39.6% increase from the previous year.
Understanding NBFIs
NBFIs are companies licensed by the Securities and Exchange Commission of Pakistan to offer various financial services, including:
- Investment Finance Services
- Leasing
- Housing Finance
- Venture Capital
- Microfinance
Despite only representing 5.8% of Pakistan’s financial system assets, NBFIs have gained traction, particularly in asset management.
Performance Amid Challenges
The financial landscape for NBFIs in CY23 was challenging, characterized by high-interest rates and economic instability. However, asset management within the NBFI sector thrived, with a notable 34.5% growth, largely fueled by mutual funds and portfolios. This segment now accounts for nearly 90% of NBFI assets.
Mutual Funds Lead the Charge
- Asset Under Management (AUM) rose by 43.7% in CY23, driven by increased investments in mutual funds.
- Islamic Funds and Money Market Funds emerged as popular choices among investors.
Interest Rate Impact
The State Bank of Pakistan has reduced interest rates from 22% to 17.5% since June 2024, with further reductions expected in the upcoming monetary policy. This move is likely to create more opportunities for NBFIs to invest and generate returns.
