A new study has revealed that Pakistan’s rapid distributed solar expansion has been overwhelmingly self-financed, with formal banking channels contributing only a small fraction of total investment.
The report titled Customer Owned Renewable Electrification (CORE) Finance Mapping, launched by Renewables First, provides a detailed analysis of distributed solar financing flows in Pakistan. It finds that formal debt accounts for just 3.4 percent of the estimated USD 14 billion invested in distributed solar systems to date.
The study shows that the country’s distributed solar capacity has reached 38 GW in FY25, driven largely by rising electricity tariffs and inflation, which have made solar power the most cost-effective energy source for households, agriculture, and industry.
Of the total installed capacity, 21.3 GW operates behind the meter, 9.7 GW is off-grid, and 7.3 GW is net-metered. The residential sector represents the largest share of adoption, followed by industrial, agricultural, and commercial users.
More than 7.3 million households in Pakistan have adopted solar systems. However, financing penetration in the residential segment remains below 1 percent, the lowest across all sectors.
The report notes that instead of banks, retailer credit systems and Buy Now Pay Later (BNPL) providers have filled part of the gap, primarily by offering point-of-sale financing rather than traditional loans. The study argues that the key constraint is not demand but financial product design and distribution.
In the agricultural sector, around 1 million tubewells have been converted to solar energy. Solar’s share in the tubewell energy mix has increased sharply from near zero to 61 percent between 2022 and 2025, significantly reducing reliance on diesel, which previously accounted for 15–20 percent of farming input costs.
Agricultural solar financing is primarily supported by microfinance institutions and niche banking products, alongside government subsidy programs and State Bank of Pakistan priority lending schemes. Despite this, formal financing penetration in agri-solar stands at 3.1 percent, representing less than 0.5 percent of total agricultural lending between FY22 and FY25.
The commercial and industrial (C&I) segment shows a highly concentrated financing pattern. Large, creditworthy industrial clients dominate access to formal financing, while small and medium enterprises largely rely on cash or informal retailer credit.
Industrial financing penetration is reported at 9.3 percent, while commercial stands at 4.8 percent. Below this tier, formal bank and microfinance participation remains minimal.
“Distributed solar does not align with conventional lending models due to small ticket sizes, high transaction costs, and collateral-based underwriting that ignores energy savings as a repayment source. Most households and businesses that could self-finance have already done so. The next phase depends entirely on unlocking structured financing,” said Ahtasam Ahmad, Energy Finance and Climate Tech Lead at Renewables First.
The report estimates that Pakistan’s distributed solar deployment avoided approximately 46 million tonnes of CO₂-equivalent emissions in FY25.
It warns that the next phase of the energy transition will depend on the availability of structured financing mechanisms. Without them, households, farmers, and small businesses may be unable to access low-cost solar energy at scale.
The report concludes that bridging this financing gap will require coordinated policy action and the development of new financial instruments to convert strong consumer demand into scalable, bankable energy solutions.
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Congrats on proving that govt doesn't do anything. People do
People suffered from 60 years of empty promises from sharif and others. Finally knowing there won't be any dams being built.
They finally adopted solar . No one is trusting the govt or ministers