KARACHI: Pakistan’s banking and financial sector witnessed a year of significant transformation in 2025, marked by major mergers and acquisitions, the entry of new digital banks, foreign expansion by fintech firms, regulatory reforms, and the exit of several players.

Competition intensified across traditional banking, fintech, microfinance, and digital payments, with institutions backed by innovation, strong governance, and scalable business models emerging as clear leaders in profitability and market presence.

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Mergers and Acquisitions

One of the most significant transactions of the year was United Bank Limited’s merger with Silk Bank, completing the amalgamation of a loss-making entity and strengthening consolidation within the banking industry.

In another landmark deal, fintech firm ABHI, in partnership with TPL Corp, acquired FINCA Microfinance Bank, which was subsequently renamed ABHI Microfinance Bank. The acquisition marked a rare case of a fintech acquiring a regulated microfinance bank, expanding ABHI’s domestic and international footprint.

Entry of New Digital Banks

Mashreq Bank and Easypaisa commenced commercial operations as digital retail banks in Pakistan during 2025. They were among the first of five digital banking licence holders to go live, targeting the country’s large unbanked and underbanked population through branchless and app-based banking services.

Foreign Expansion by Pakistani Fintechs

ABHI expanded operations across Pakistan, the UAE, and Bangladesh, and entered Saudi Arabia through a strategic partnership with Alraedah Digital Solutions, along with agreements with Tray and AlBauyt. The move positioned ABHI among the few Pakistan-origin fintechs operating in the Kingdom.

Meanwhile, Haball, a PSP/PSO operator, raised US$52 million through a mix of equity and debt and expanded its Shariah-compliant SME financing platform, Wisaaq, into Saudi Arabia. The funding included a US$5 million equity investment from Zayn VC and US$47 million in off-balance-sheet financing from Meezan Bank.

Cryptocurrency and Virtual Assets Regulation

In a major policy shift, the government decided to legalise cryptocurrency-related businesses and established the Pakistan Virtual Assets Regulatory Authority (PVARA).

Following this, global crypto exchanges such as Binance and HTX received no-objection certificates to pursue operating licences, establish local subsidiaries, and explore the tokenisation of up to US$2 billion in sovereign bonds, treasury bills, and commodity reserves.

Experts described the move as a positive signal for foreign investor confidence and potential foreign direct investment inflows.

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Growth in Non-Banking Financial Companies

The Securities and Exchange Commission of Pakistan issued NBFC licences to several fintech operators during 2025, including Alif Finance (Private) Limited, a subsidiary of Alif Capital Holdings with operations in Central Asia.

Licences were also granted to Foremost Financial Services and Instant Finance (Private) Limited, firms with prior experience in markets such as Indonesia, Mexico, and Nigeria.

Expansion of Islamic Banking

Islamic banking continued its steady expansion. Samba Bank received regulatory approval to convert into a full-fledged Islamic bank, while the Bank of Khyber progressed toward complete Shariah-compliant conversion.

United Bank Limited converted all operations in Khyber Pakhtunkhwa and Balochistan to Islamic banking.

In the microfinance segment, Mobilink Bank launched Islamic banking operations, enabling Shariah-compliant products through JazzCash. LOLC Microfinance Bank and ASA Microfinance Bank also entered or prepared to enter the Islamic microfinance space, joining NRSP Bank and U Microfinance Bank.

Microfinance Sector Developments

Halan Microfinance Bank Limited, backed by Egypt-based MNT-Halan, received a nationwide licence and focused on digital banking services, including mobile wallets, cards, and Buy Now, Pay Later products.

Payment Systems and Financial Inclusion

The State Bank of Pakistan launched PRISM+ in June 2025, modernising the country’s real-time settlement infrastructure and enabling automated money market operations, government securities trading, and collateral management.

SBP also introduced Pakistan’s Financial Inclusion Index, a data-driven measure based on sixty-nine indicators covering access to, usage of, and quality of financial services across banking, non-banking, and payment systems.

Closures and Market Exits

The State Bank of Pakistan de-scheduled SME Bank Limited following its liquidation under an Islamabad High Court order.

Meanwhile, fintech startup Savyour shut down operations despite raising US$3.3 million in seed funding and serving over four million users, citing sustainability challenges amid intense competition.

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Policy Rate Movements

The Monetary Policy Committee kept the policy rate unchanged at 11 percent for most of 2025. In the final decision of the year, the rate was reduced by 50 basis points to 10.50 percent, remaining higher than rates in several regional peer economies.