For decades, Pakistan has run on credit. Not the kind that shows up on balance sheets or credit scores but the kind negotiated across shop counters, backed by personal guarantees, and enforced through relationships rather than contracts. Walk into an electronics market in Lahore or a motorcycle dealership in Karachi, and you will find offline versions of Buy Now, Pay Later (BNPL) operating in their most basic form – goods exchanged on trust, payments spread over time and prices inflated to absorb risk.

Installment buying has long been embedded in the country’s economic fabric and its scale is understood to be massive but opaque and informal. In essence, what fintech calls BNPL is, in Pakistan, less an innovation than an attempt to digitize a system that never needed software to begin with. That is the market Alibaba Group is now entering through its subsidiary Koko Tech Private Limited.

On Tuesday, the Securities and Exchange Commission of Pakistan (SECP) granted Koko the NBFC license – the default license for low-ticket lending such as nano lending and buy now pay later. Koko had been trying to do BNPL in Pakistan for a few years and had been in talks with Pakistani BNPL companies. This is also the market that Qisst Pay, a former Pakistani BNPL player that quietly wrapped up in 2024 is re-entering, their CEO Jordan Olivas confirmed to Profit.

On the surface, it signals renewed confidence in a financial services category that once promised to transform consumer finance in Pakistan. Underneath, it raises a more difficult question: What has changed? Because the last time BNPL surged in Pakistan, it ran into a reality that technology alone could not solve.

And that reality is still very much intact – the financial situation of Pakistani consumers is The first time installment credit showed up in Pakistan, it didn’t arrive through an app or a checkout flow. It came through a conversation. Shopkeepers extended credit based on who you were, where you lived, and who could vouch for you.

Payments were split informally, prices quietly adjusted, and enforcement relied less on contracts and more on relationships. It was, as Arif Lakhani, CEO of Kisst Bazaar puts it, a system built on “personal guarantees and physical verification.” All to ensure that customers pay back. That reality might very much still be intact: while the opportunity of customers needing BNPL is large because consumers are very cash constrained, for the exact reason, there is a fear that a large number of consumers might also not pay back.

So what does the entry of AliBaba in Pakistan’s BNPL scene hold and what changes can it bring. The need for BNPL in Pakistan To understand why BNPL exists in Pakistan, you have to look at how the system is structured. None of the factors in this system operate in isolation.

They reinforce each other creating a consumer who is not just underserved but structurally constrained and it begins with access. Pakistan’s credit card penetration is less than 1%, one of the lowest in the world. For majority of the consumers, revolving credit does not exist and there is no formal fallback mechanism to smooth expenses.

Informally, people turn to loan sharks and end up getting stuck in a vicious payment cycle and end up paying exorbitant interest. Without the option of predatory lending, it is a situation where a consumer can either pay for something today or they can not. Because there is no putting expenses on a credit card for most of the Pakistani population either for religious reasons or because banks won’t hand over a credit card to a customer that they think is high risk.

Average monthly household income is approximately Rs82,179 according to Pakistan Bureau of Statistics 2024–25 data for a family of 6 people. Per capita income translates to roughly Rs13,700. An estimated 36% of the income goes to food expenses alone, resulting in a very restricted disposable income.

If banks lend to such customers in any form, chances that she/he will default are very high. This means that financial planning is more about survival for most of the population than optimization. Cash flow is tight and savings are minimal.

On top is the layer of inflation. As prices rise, whether for food, fuel or basic household goods, the gap between income and expenditure increases. Every single purchase restricts cash flow and even essentials start getting out of reach.

The result is a consumer that is severely cash constrained looking for credit to purchase. In Arif Lakhani’s words, Pakistani consumers are so cash constrained that the majority of the population needs BNPL. Lakhani argues that if you look at the basic necessity purchases, a basic refrigerator costs around Rs80,000, a phone costs Rs40,000 and a motorbike can reach Rs140,000.

“Who in Pakistan today has Rs250,000 in cash?” he asks. Who does BNPL work for? The average monthly income hovers a little above Rs80,000, but most of that is already spoken for. Rent, utilities, transport, and foo