FEW companies are hailed as proof of free-market genius more than Tesla. Yet, at every turn that mattered, it stood on public capital.
In 2010 it borrowed $465m from a US federal programme open to every carmaker building cleaner vehicles, in a country where transport is now the largest source of greenhouse gases. It paid the Treasury’s own cost, roughly one to 3.4 per cent, with principal deferred until production began. One of the smallest borrowers, it became the star, repaying with interest nine years early. Regulatory credits, earned by beating emission rules and bought by those that fall short, then carried it into profit.
Pakistan asks its banks to do alone what no quintessential capitalist economy asks of its own: lend to priority sectors without the state sharing the risk and the price. This is not a lesson taken from state-led economies such as China, where public support is part of the model. It comes from the market economies themselves, which do it openly and without apology. Tesla is not their exception; it is their method.
Look at where they aim interest subsidies, and how deep. Farming comes first: America lends beginning farmers money to buy land at under 2pc and caps their operating microloans at 5pc, while Canada pays the interest on the first C$250,000 of each grower’s cash advance. Housing is next: France gives first-time buyers zero-interest loans and compensates banks through tax credits. Then enterprise: Britain lends start-ups unsecured at a fixed 6pc, with mentoring, and its firms outlive their peers; Germany’s KfW cheapens founders’ loans and absorbs four-fifths of any loss so local banks will lend.
In every case, the taxpayer took the first risk and part of the financing cost, at the stage private finance would not, and demanded performance in return. And the subsidy went to the borrower, the priority-sector player, not the lender: the bank is paid only the market interest the borrower is spared.
Subsidies have built giants, and an emerging economy needs them more, not less.
That is the global norm. Why, then, is Pakistan so averse to it? Here, subsidy for producers is treated as a dirty word, subsidised credit is misread as a benefit to banks, and lenders are blamed for holding back from risks their peers abroad never shoulder unaided. Asking them to match the world’s lending without the world’s toolkit is neither fair nor realistic.
The money exists; its direction is the problem. This year’s federal budget allocates Rs838bn to the Benazir Income Support Programme, up by a sixth, and almost as much to the power sector; provincial budgets add their own spending on wheat, fertiliser and household relief. Little of it is designed to make the poor bankable.
BISP is indispensable. Reaching some 10 million families through a national registry and digital payments, it is one of the country’s institutional achievements, and that safety net must stay. But a stipend, by its nature, protects rather than transforms. A net that never becomes a springboard keeps the poor safe, but poor.
BISP must now be balanced with wealth creation at the lower strata of society, so that families able to work have a path from support to enterprise. Wealth, like subsidy, is not a bad word. It can be created at every level, including the bottom, and it is what keeps incomes rising sustainably. The cliché about wealth must go, just like subsidies.
So add a ramp without lowering the floor: dedicate a tenth of BISP’s allocation to an enterprise window within the programme; that is smaller than this year’s increase, so no family need receive less than last year.
Run it as the world does. Target precisely: older people, persons with disabilities and households with no working member keep their full stipend; working-age households, starting with the women BISP serves, get concessional credit for livestock, horticulture, cottage industry, solar trades and digital work. Price it for the borrower: the first loan interest-free and repeat loans at no more than 5pc, the state paying the difference. Pay for delivery: lenders earn the subsidy only for verified results, and every loan comes with training and a mentor. Build the exit: the stipend tapers only once the business stands, and the subsidy steps down with each cycle.
Even at today’s rates, that tenth could carry some Rs400bn of lending: over a million small businesses. Audit it independently after three years; scale it only if it works.
Two objections deserve answers. Credit alone, global trials show, raises poor families’ incomes only modestly; what lifts them for good is capital paired with training and continued support while the business finds its feet, which is this design. Nor does the window raid BISP: it is paid for from the programme’s growth and serves the same households.
It is time to retire the reflex that subsidies never create wealth or welfare. Bad design is bad; subsidy is not, if it pays for the initial risk rather than permanent inefficiency. Subsidies have built giants, and an emerging economy needs them more, not less.
Washington’s decisive bet on Tesla was not a stipend but a loan, tied to milestones. Pakistan’s Teslas are smaller — a woman’s dairy herd, a tailor’s workshop, a graduate’s laptop — but they deserve the same deal: capital to start, conditions to keep, and a way out. Then the cycle begins again with the next borrower. That is routine in every quintessential capitalist economy, and it should be in Pakistan too.
The writer is a development-focused and impact-oriented banker.
Published in Dawn, October 30th, 2026
