Karandaaz Pakistan and DigiKhata Financial Services (DKFS) have signed a strategic partnership to launch an Embedded Finance Facility (EFF). This is a first-of-its-kind initiative that turns everyday merchant payments into a pathway to formal credit for Pakistan’s small retailers.

The model is designed to solve twin problems of the retail sector at once: low adoption of digital payments and limited access to formal financing. Pakistan’s retail and wholesale trade is a major contributor to GDP and to the country’s MSME base, yet it remains overwhelmingly cash-driven. Without a verifiable digital financial history, most merchants are effectively invisible to lenders and shut out of the credit they need to grow.

The EFF breaks that cycle with a feedback loop model: every transaction builds a merchant’s credit profile, enabling more accurate scoring and progressively larger financing as their digital footprint matures. In doing so, it transforms Raast from a payments rail into a genuine gateway for financial inclusion, and a catalyst for formalising Pakistan’s retail economy.

Waqas ul Hasan, Chief Executive Officer of Karandaaz Pakistan, said: “By embedding credit directly into the digital payments journey, we are creating a self-reinforcing cycle. Merchants adopt digital payments to access financing, and that financing in turn enables them to grow, formalise, and participate more fully in the digital economy.”

Adnan Aslam, CEO and Founder of DigiKhata, said: “This partnership combines the lending infrastructure of financial institutions with DigiKhata’s extensive merchant reach and transaction data. As one of Pakistan’s largest small-business platforms, we bring the scale, data depth and merchant trust required to make embedded finance work at the last mile.”

The initiative is designed to deliver lasting economic impact for participating retailers, and to offer a replicable blueprint for the next wave of digital financial inclusion across Pakistan.