Pakistan's regulatory shift toward easier business formation

SECP’s dual mission in business registration

Muzamil opens by asking Abdul Rahim to explain what confuses most young entrepreneurs in Pakistan. The problem is clear. “In Pakistan it is generally a big youth population, people want to go to entrepreneurship, want to do business, and they have confusion, what is the system,” Muzamil says. Abdul Rahim clarifies that SECP handles business registration for all entities, sole proprietorships, partnerships, private companies, public companies. But SECP also regulates specific sectors: capital markets, insurance, mutual funds, brokers. A small business registered with SECP for incorporation does not fall under SECP’s regulation unless it is a broker, insurance company, or mutual fund. Most small businesses answer to other regulators or provincial authorities. This distinction matters. Many entrepreneurs wrongly assume that registration with SECP means SECP oversight of their daily operations.

Dramatic improvement in ease-of-doing-business metrics

The numbers tell a story of momentum. Pakistan’s World Bank ease-of-doing-business ranking improved from 136 to 108 in a single year. In the sub-category of starting a business, directly tied to SECP, Pakistan jumped 58 points to rank 72. Abdul Rahim attributes this to process simplification, digitization, and direct feedback from entrepreneurs and business groups. SECP ran design-thinking workshops in major cities, asking citizens what bottlenecks existed. The response? Better step-by-step guides, animated videos, and chatbot support on the SECP website. “We focus on continuous improvement, we are trying to upgrade, replace our systems, user experience,” Abdul Rahim says. The shift is tangible.

Online registration reshapes how businesses form

The most visible change is online registration. “Company can be registered entirely online in November 99% of them were online,” Abdul Rahim states. This represents a massive behavioral shift. Beyond the ease, company formation numbers themselves are up. Year-over-year growth is about 40 percent. Muzamil asks what sectors are driving growth. Abdul Rahim points to construction and cement, IT companies, trading, and tourism. Growth also reflects a broader cultural shift toward entrepreneurship and freelancing as young Pakistanis seek independence from traditional employment.

Supporting startups through engagement and incentives

SECP is not just removing barriers. It is actively engaging with incubation centers in Karachi, Lahore, Islamabad, and Peshawar. Abdul Rahim has visited centers and met directly with founders to understand what they need. One concrete example: employee stock options were not allowed in the Companies Act for startups, though they were standard in the US and global tech hubs. SECP enabled this mechanism. Founders can now grant equity to attract talent when cash is scarce. SECP also introduced limited liability partnerships (LLPs) as a formal structure and reduced documentation and approval requirements for valuations and option grants. All of these changes came from industry feedback. However, some of these incentives lapsed when an ordinance expired, and SECP is working to codify them permanently through amendments to the Companies Act.

The regulatory sandbox: testing fintech at scale

Abdul Rahim highlights the SECP Sandbox as a centerpiece of innovation policy. The sandbox lets fintech companies and startups propose new products and business models without a full regulatory framework already in place. The first cohort received 32 to 35 applications, shortlisted 13, and approved 6. Approved projects include digital-only insurance (buying insurance through an app with online claims), robo-advisory (AI-driven investment advice based on risk appetite and demographics), online mutual fund platforms, and peer-to-peer lending via Finja. Each runs for six months in a live environment with real customers, overseen by SECP. If successful, the startup can apply for a full license. This model, used in the UK and US, lets Pakistan move fast without waiting for legislation. Muzamil is visibly impressed. “I did not expect the SECP to be this progressive,” he says.

Digital onboarding and the financial literacy gap

Abdul Rahim describes SECP’s recent digital onboarding framework for stock trading. Pakistanis no longer need to visit a broker’s office with documentation. They can open an account from home in 24 to 48 hours using digital signatures and NADRA verification. This is a sea change. Yet Abdul Rahim frames it as a building block. The real constraint is financial literacy. Universitiesdo not teach investment, savings, or wealth management. Most Pakistanis are risk-averse because they do not understand capital markets. They park money in land or gold. “If you don’t tell people what are the investment savings, what are the mutual funds, what are the stock trading, so then people don’t have awareness,” Abdul Rahim explains. This mindset slows equity fundraising and capital market depth.

Pakistan’s IT sector and foreign investment opportunity

Toward the end, Abdul Rahim shares an optimistic view. Pakistan is attracting foreign tech investment. Facebook, Bloomberg, and other tech giants operate in the region. Pakistan ranks number two or three as a freelance destination globally. IT exports show over 40 percent growth. Companies from the US are already running back-office operations in Pakistan at competitive rates. The population is young and digitally literate. Special economic zones with relaxed regulations for foreign IT firms create further incentive. Abdul Rahim sees the macro indicators, remittances, exports, foreign exchange reserves, all moving in the positive direction. “I have a positive outlook,” he concludes. Muzamil closes by thanking Abdul Rahim and expressing hope that the optimism holds true.