Why Dukaandars Can't Get Trade Credit

A dukaandar in Lahore has a good shop, regular customers, and steady monthly sales. She wants to stock more so she can serve customers instead of turning them away. But the supplier will only take cash on delivery, so she has to pay for every case before she sells a single item.

That one restriction is quietly deciding how big her business can get. This post explains why it exists, what it costs her, and what would have to change to lift it.

The problem: nobody can check who she is

Here is the part that surprises most people. The supplier is not being unfair, and the bank is not ignoring her. The problem is that there is no reliable way to answer a basic question: is this retailer someone who pays on time?

To answer that, someone needs a record of her past orders and her past payments. For most small retailers, that record does not exist anywhere. It is not written down, and it is not visible to anyone outside her own locality.

So the supplier looks at what they can actually see. They see a shop they have never visited, buying cash, with no track record. From where they are standing, that looks exactly like a shop that will not pay. And being wrong about that is expensive, so they choose the safe option.

How big is this problem?

It is not a handful of shops. The International Labour Organization, through its employment estimates published by the World Bank, reports that 55.51% of Pakistan's workforce in 2025 was in vulnerable employment, with 57.01% self-employed.

In plain terms, more than half of all workers in Pakistan run their own small business and employ nobody. In a manufacturing economy that might mean freelancers. In Pakistan it mostly means the small traders and shopkeepers who keep goods moving across the country.

That is a large share of the people running Pakistan's wholesale network, and almost none of them have a formal record that a bank or a supplier could look up.

What it costs everyone

This does not just inconvenience one retailer. The cost spreads to suppliers, and eventually to the person shopping.

• Shops stay smaller. Without credit, a retailer can only buy what she can pay for right now. She holds less stock, runs out more often, and loses sales she could have taken.
• Suppliers carry all the risk. To protect themselves, suppliers keep order sizes small and refuse credit to anyone new. Growing a customer becomes slow and expensive.
• Brands add another layer. When a supplier cannot check retailers directly, the brand pushes stock through a local distributor who already knows the area. That extra step takes a cut before anything reaches a shelf.
• Shelves get more expensive. All of that cost has to land somewhere. It ends up in the price the customer pays for the same product.

Notice that none of this is about a lack of demand. People are buying. The problem is that nobody can safely agree to sell on credit.

Why it does not fix itself

You might expect a good retailer to build a track record by paying on time. But paying on time does not create a record, because the payment was cash. There is nothing to look up afterwards.

So the retailer stays stuck in a loop: no record, so no credit, so still no record. She cannot break out of it on her own, because the one thing she would need in order to get credit is the one thing she cannot get without credit.

The solution: make her visible first

The fix is not a new bank product. Banks already know how to lend. What they cannot do is price a risk they cannot see. Three changes would break the loop, and the order matters.

Step one: a business identity she can get quickly. A simple registered identity that a small retailer can obtain in days rather than months, at a cost she can absorb. Everything else depends on this. It is paperwork before it is finance.

Step two: records created by normal trade. The record has to happen automatically as part of buying and selling. If writing it down takes longer than the sale itself, nobody will do it, and the problem stays exactly where it is. A small retailer will only adopt a process if it is faster than the alternative.

Step three: payments that leave a settlement trail. A verifiable record of who paid whom, how much, and whether the money actually arrived, building up on its own over months. That is the exact thing a supplier needs before agreeing to credit.

What this does not do

It is worth being straight about the limits. Being visible does not guarantee that anyone will be paid. It turns an unpriceable risk into a priceable one, which is a real improvement but not a safety net. Some retailers will still fail.

It also does not replace trust. Six months of on-time payments tells a supplier that a retailer is reliable. It does not tell the supplier what she sells, whether her stock is moving, or whether the numbers make sense for her area. Being able to see someone clearly is a floor, not a substitute for knowing them.

What this means for you today

If you run a shop and have wondered why suppliers insist on cash, the answer is usually not a judgement about you. It is that you have no record they can check. Keep every receipt. Keep a simple written or phone record of what you order and what you pay. Pay on the dates you agree to. That history is what eventually earns you terms, and right now most of it is being thrown away.

For suppliers, the practical step is to start recording. A simple list of who orders, how much, and whether they paid, kept consistently, will be worth more over a year than any amount of guesswork.