Non-Banking Finance Companies (NBFCs), as the name suggests, are financial institutions that provide selected financial services but do not hold a banking license. In most cases, NBFCs are not allowed to take demand deposits and unlike banks, cannot offer checking accounts. In Pakistan, NBFCs are engaged in specialized financial services and are envisioned to play an important role in mobilizing finance to complement the outreach of the banking industry, especially in underserved segments such as the SME sector, housing and infrastructure development, leasing and discounting. Locally domiciled NBFCs are regulated and licensed by the Securities and
Exchange Commission of Pakistan (SECP) and the Non-Banking Finance Companies (establishment and regulations) Rules, 2003 & the Non-Banking Finance Companies and Notified Entities Regulations, 2008 are the main set of guidelines around governance, operations and structure of NBFCs.

In 2015, the SECP introduced amendments to the Regulations that divided NBFCs into two categories: i) Lending NBFCs, and ii) Asset Management NBFCs. Also included in the lending NBFC category were non-bank microfinance companies (NB-MFCs). This essentially resulted in an existing specialized category of microfinance lenders being placed under the purview of the SECP under a uniform regulatory framework. The different types of NBFCs operating in Pakistan are presented in Exhibit 1 on the following page. They differ in terms of the services they offer, their clientele, minimum equity, and licensing requirements