How Fintech Is Bridging The Credit Gap For The World's Unbanked

Forbes

2 days ago

Murtaza Ali is President of JazzCash.
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Zara, a skilled seamstress in Lahore, often called the heart of Pakistan, creates intricate wedding garments that are in high demand throughout her community. Though she has reliably paid her utility bills for 15 years and maintains a positive balance in her mobile wallet, not a single bank would approve her loan application to expand her growing business. Her predicament mirrors that of millions across Pakistan who remain invisible to the traditional banking sector.
This issue represents a pressing economic challenge in Pakistan, as well as other parts of the world: having a vast population with demonstrable financial discipline, yet for many, no pathway to formal credit. According to recent statistics, 60% of Pakistan's adult population is integrated into the financial system, with less than 2 million having access to formal credit. Traditional banks require financial documents including salary slips, tax documents and collateral, which excludes millions in the informal sector from formal lending opportunities. As a result, these individuals have no choice but to rely on informal lenders, who are often not transparent with their terms and can exacerbate financial insecurity.
The consequences extend beyond individual hardship, creating systemic barriers that stifle entrepreneurship, limit business growth and constrain economic mobility across all sectors. On the other hand, fintech credit scoring models help expand financial inclusion, as they enable risk assessment beyond conventional metrics such as collateral or salary slips. Fintechs can use alternative digital data, such as wallet transactions and payment patterns, to assess creditworthiness for people outside the formal banking system. This is a game changer for Pakistan's unbanked population, who can access real-time credit with their pre-whitelisted limits—preapproved borrowing amounts determined using alternative data such as mobile usage or digital transaction history.
The impact of this approach is already proving transformative in Pakistan. Through fintech-based credit from digital lenders such as our company, JazzCash, small and medium-sized businesses, which account for 40% of Pakistan's GDP and employ roughly 80% of the workforce, are now able to more easily expand their operations, purchase inventory and improve cash flow. These data-driven innovations are beginning to reshape Pakistan's financial landscape providing crucial credit to small businesses and individuals often overlooked by traditional banks, complementing the State Bank of Pakistan's wider push to expand financial inclusion.
Fintech innovations are also transforming access to credit in other emerging markets beyond Pakistan. In the Philippines, digital disruptors such as Tonik and Salmon are similarly stepping in to solve the challenges of lending to consumers without formal credit histories. Salmon, for example, uses AI-driven credit evaluation methods and alternative data in its lending process. It has also integrated facial recognition technology into its KYC processes.
Other emerging markets are also feeling the benefits of innovative, tech-enabled credit scoring tools. In Kenya, M-Shwari, a mobile-based credit solution that uses transaction history and behavioral data to determine loan eligibility, has so far disbursed over $6 billion in loans and attracted 32 million users. In Latin America, meanwhile, inDrive Money, a financial services vertical of global ride-hailing platform inDrive, is also leveraging alternative data to facilitate loan access to drivers and unlock lending for the underbanked in Mexico, Colombia, Indonesia and Peru.
While the impact of these types of fintechs is already significant, their work is not without its own set of obstacles, and several ongoing challenges remain.
In underbanked markets—particularly those plagued by high rates of online fraud—newer fintechs must work hard to win the trust of customers who might be skeptical about using digital services. This means they have to actively counteract this perception by heavily investing in locally targeted marketing and financial education initiatives.
Additionally, since these consumer-lending fintechs need to leverage alternative data for credit scoring, they are heavily reliant on operating in markets with progressive, forward-thinking regulators. So, expanding access to credit in markets where the regulator doesn't explicitly allow the use of alternative data for credit scoring is a challenge.
Lastly, fintechs rely on 'unstructured' alternative data, which is less concrete and therefore more challenging to use for accurately forecasting financial behavior. Therefore, they require access to far larger volumes of data to create accurate credit engines. While larger fintechs, including our company, have already found ways to meet this challenge, many smaller players are still actively working to overcome it.
As the president of one of Pakistan's leading fintechs, I recognize that harnessing alternative data and digital technologies is an effective and accessible way of unlocking consumer lending and bringing millions of the unbanked into the formal economy. While making a difference to the economic empowerment of individuals like Zara, the seamstress from Lahore, it can also have an important multiplier effect for the economy and society at large. Providing financial services to unbanked individuals, women in particular, can fuel economic growth and job creation, as well as play a key role in improving health, education and food security.
With nonbank financial intermediaries holding 49% of global financial assets, fintechs have the power to become the force for driving greater financial access on a global scale.
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