Between July and August, things are brought to almost a halt across much of Europe. Italy shuts down for Ferragosto, the French vanish on les grandes vacances, and the German offices empty out. During this window, everything — deadlines, emails, occasional sovereign crisis — can wait.
For Pakistani economy nerds, late summer means something completely different, though no less exciting if you are warped enough. It’s because by this time, the data for fiscal year-end starts being released, giving a complete picture of how things panned out.
Of all the numbers that land in this season, it is banking that appeals to me the most for a multitude of reasons. For starters, it has had quite an enviable run the past few years and remains highly profitable even as other parts of the economy struggle. Second, its data reporting is relatively richer and granular than most other sectors.
Starting with the liabilities side, total deposits reached Rs39.8 trillion by FY26, up 15 per cent over the previous year. That’s a fairly impressive haul considering the size of the industry, where any incremental change requires hundreds of billions of rupees to move the needle.
Loans to SMEs crossed Rs1tr for the first time in FY26, surging by an impressive 37pc over the preceding period
But these are nominal figures and are naturally helped by inflation, which was just north of 11pc in FY26. To see whether the industry has expanded its reach or not, we need a relative measure. Deposits as a percentage of GDP reached 31.4pc by June. While this marks a continuous upward trajectory over the last few years, the ratio still remains slightly short of the preceding decade’s average.
Category-wise breakdown shows non-bank financial institutions to be leading the growth charts, up 48.9pc to Rs2.9tr by FY26. This is part of a recent history of the non-bank financial institutions’ balance sheet expansion, which saves the best of its movements at year ends when banking needs wild swings.
Meanwhile, individuals continue to make up the lion’s share, though their contribution in the overall pie has dwindled over the last few years and now stands at 45.5pc, worth Rs18.1tr. More worryingly, private sector businesses were the major laggard, with a five year compound annual growth rate of 13.3pc against the overall rate of 15.8pc, and have lost 2.2 percentage points in relative share since FY21.
On the asset side, the story is a bit more mixed: total credit to the private sector rose 14.8pc to Rs11.4tr by June, from Rs9.9tr the year before. Of this, businesses understandably comprised the bulk at Rs9.6tr, jumping by 14pc over FY25, while personal financing grew much faster at 25.2pc, albeit over a far smaller base, to cross Rs1.5tr in FY26.
However, loans only play a supporting character in the banking balance sheet, with advances-to-deposits ratio consistently hovering below 40pc since May 2025. The lead role has also been performed by the government, which gets most of the funds, as clear from investments-to-deposits of over 100pc.
Notwithstanding the banality of aggregates, there have been a few important shakeups in the credit ecosystem lately. After years of stagnancy, we are now seeing a revival in loans to small and medium enterprises (SMEs), crossing Rs1tr for the first time to reach Rs1.046tr by June, surging by an impressive 37pc over the preceding period. This comes out to be 10.66pc of the total private business loans, up 1.8 percentage points over FY25 and marks the highest level in at least 8 years.
While the base effect has helped partially, let’s not downplay the underlying shift. This is not a one-off increase, as SME loans have risen at a five-year compound annual growth rate (CAGR) of 17pc, outpacing the 10pc rate seen in the non-SME segment. A closer analysis reveals this to be a story of two halves where non-SME loans were in the driving seat between FY21 and FY23, rising by 11.1pc CAGR, almost 2x as fast as the SME segment. However, the trend reversed over the next three years.
Within the SME book, more than half has consistently gone towards the services sector, clocking in at Rs570bn by FY26. On the other hand, there has been a recomposition among the other two groups, even as the absolute values continue to rise, with agri’s share in the total rising from not even 1pc in FY19 to around 12pc by FY26 – with the amount increasing at a five year CAGR of 62pc to Rs130bn. In relative terms, the industry has lagged behind, up by a much more modest 21pc over the preceding year to end of June at Rs346bn.
Drilling one level further into the subsectoral divisions shows how narrow the book is. Of the 79 subsectors the State Bank of Pakistan reports, only 15 carry an SME book above Rs10bn, and the top three alone — retail trade (Rs178bn), wholesale trade (Rs164bn) and crop and animal production (Rs130bn) — account for 45pc of outstanding credit and 57pc of everything added since FY21.
Though the progress is unmistakable, it needs to be viewed against the broader policy targets. In the National Financial Inclusion Strategy (NFIS) 2024-2028, the State Bank had set a goal of SME loans worth 10pc of the private sector credit by FY28. That number has already been breached, two years before the deadline.
Unfortunately, things are never as simple as progress reports show, and require some historical context. We find exactly that in the previous edition of the NFIS, where the share of SME loans as a proportion of private credit was supposed to reach 17pc by FY23. So when performance fails to catch up, the trick is to shift the goalpost.
The writer is co-founder of Data Darbar and Head of InsightLab at KSBL.
Published in Dawn, The Business and Finance Weekly, August 10th, 2026
