Financial innovation Pakistan urgently needs is not just a buzzword anymore, Finance Minister Muhammad Aurangzeb put it at the centre of the country’s economic strategy on 2 November 2026, telling banking leaders that digital tools must cut the cost of doing business and bring millions more people into the formal economy.
What Aurangzeb Said and Why It Matters
Aurangzeb was virtually addressing the ‘Dialogue on Digital Assets and the Future of Banking’, organised by the Pakistan Banks’ Association in collaboration with LUMS. His message was straightforward: technology must earn its place by solving real problems, not by sounding impressive.
The finance minister said Pakistan needed ‘financial innovation’ that reduced the ‘cost of doing business and brings more people into the formal economy,’ adding that digital assets should be assessed based on the economic benefits they could deliver.
He highlighted several potential benefits, including reducing the cost of international remittances, enabling faster business payments, improving access to affordable financing for entrepreneurs and attracting productive investment while maintaining financial stability.
Aurangzeb said Pakistan was moving from macroeconomic stability towards sustainable growth, a transition that required fiscal discipline, stronger exports and greater private investment.
The Informal Economy Problem That Makes This Urgent
To understand why Aurangzeb is pushing so hard, look at the numbers. Informal employment in Pakistan stands at 88.5% of the workforce as of 2026. That means the vast majority of working Pakistanis are outside the formal financial system, with no easy access to loans, insurance, or even a basic bank account.
A significant 35-40 percent of the economy remains informal and is outside of the formal system. This is the gap that financial innovation Pakistan needs to close. When people transact in cash and stay off the books, the government cannot collect tax from them, banks cannot lend to them, and they cannot build a credit history.
Expanding digital access, especially through mobile wallets and fintech platforms, can bring these workers and micro entrepreneurs into the formal financial fold. As users transact digitally, they build financial footprints that make them eligible for savings products, micro-credit, insurance, and other essential financial services.
What This Means for Pakistan’s 5.2 Million SMEs
Small and medium businesses have the most to gain. Pakistan has 5.2 million small and medium enterprises, yet despite anchoring the country’s productive economy, SMEs receive a mere 6-8% of total private-sector credit. That is one of the lowest rates in South Asia.
Aurangzeb said financial innovation should focus on reducing remittance costs, accelerating business payments, improving access to financing for entrepreneurs and increasing productive investment.
Aurangzeb also stressed the need to address challenges faced by SMEs, particularly regarding access to finance, taxation and regulatory requirements. Faster digital payments mean a small shopkeeper in Faisalabad can get paid the same day, not weeks later after chasing a cheque.
For more context on how open banking is opening doors for smaller fintech players, see our earlier piece on SBP open banking rules and what they mean for Pakistan fintech.
Financial Innovation Pakistan Already Has a Legal Framework For
Aurangzeb said Pakistan had established a statutory framework through the Virtual Assets Act 2026, under which the Pakistan Virtual Assets Regulatory Authority (PVARA) was responsible for licensing and supervising virtual asset service providers. Think of PVARA as a traffic warden for digital money, it decides who is allowed on the road and sets the speed limits.
He said the next step is to ensure its effective implementation through capable supervision and stronger coordination among institutions. In other words, the law exists; now regulators have to make it work in practice.
He stressed digital financial innovation must be accompanied by appropriate safeguards, regulatory oversight and cybersecurity measures. That is a nod to the real risk: more digital transactions also mean more targets for fraudsters and hackers.
The minister also said restrictions on banks investing, trading or holding virtual assets using their own funds or customer deposits remain in place, so ordinary depositors are still protected while the ecosystem grows carefully.
You can read about the government’s broader digital asset push, including the Eurobond tokenisation plan, in our coverage of Pakistan’s Eurobond tokenisation and the Cabinet approval process.
Banks Are Being Asked to Step Up
Addressing banking sector leaders, Aurangzeb urged financial institutions to develop practical proposals and invest in the expertise required to assess emerging technologies. This is a clear signal that the government does not want to do this alone. Banks have the customer base, the trust, and the infrastructure. They are being asked to bring ideas, not just wait for instructions.
The finance minister emphasised that banks remain central to protecting customers’ funds and reducing risks associated with digital technologies. Digital innovation does not replace banks here, it runs through them.
The State Bank of Pakistan and the Ministry of Finance are both contributing to the regulatory framework that will govern how this plays out. The practical next step is cabinet approval for the Eurobond tokenisation request for proposals, which will be an early test of how quickly Pakistan can turn talk into action.
Frequently Asked Questions
What did Finance Minister Aurangzeb say about financial innovation?
Aurangzeb said Pakistan needed financial innovation that lowers the cost of doing business and brings more people into the formal economy as the country moves from economic stabilisation towards sustainable growth.
What is the Virtual Assets Act 2026?
Pakistan established a legal framework through the Virtual Assets Act 2026, which created the Pakistan Virtual Assets Regulatory Authority (PVARA) to license and supervise virtual asset service providers. It is the main law that governs crypto, digital tokens, and similar tools in Pakistan.
How big is Pakistan’s informal economy?
A significant 35-40 percent of Pakistan’s economy remains informal and outside of the formal system. Financial innovation, especially mobile payments and digital wallets, is seen as one of the most practical ways to bring this activity into the tax net without heavy-handed enforcement.
How does fintech help ordinary Pakistanis and small businesses?
Financial innovation can help by making banking services more accessible, transactions faster and payments more affordable. Small businesses, entrepreneurs and individuals, particularly those in underserved areas, stand to benefit from a more efficient digital financial system.
