Access to credit is important for economic growth, creating employment and smoothening consumption for households. It is also an important factor in increasing the incidence of financial inclusion – a concept that implies inclusivity through easily accessible and affordable financial services for all businesses and households. Aside from credit, these services include remittances, insurance and savings among others. The focus of financial inclusion is entirely on formal provision of these services by financial institutions that are regulated by the state.

The objective of this policy brief is to answer incisive questions around borrowing in Pakistan: What is the incidence of borrowing among adults? Why do they borrow and what are their preferred means to attain loans? To answer these types of questions, the paper relies on demand-side surveys conducted by policymakers such as the State Bank of Pakistan and multilateral agencies such as the World Bank. These are rich surveys that help construct the dynamic of borrowing in the country. In addition, these surveys have enough statistical precision to explain geographical variations in borrowing patterns between different provinces and other segments such as urban/rural and informal/formal borrowing.