he study estimates whether the role of non-banking financial institutions in managing economic vulnerability contributes to whether non-banking financial institutions’ role in managing economic vulnerability contributes to higher economic welfare at the public level in Pakistan. The empirical estimation is carried out on secondary data ranging from 1990 to 2020. Using autoregressive distributed lag estimation technique, short-run and long-run effects on non-banking financial institutions are examined. The study contributed to the following: the short- and long-run connection between economic development and non-banking financial institutions (NBFIs) was found, while an experimental outcome indicated a causal connection between NBFIs and financial development improvement. Moreover, the non-banking financial institutes reduce the economy’s real sector due to excessive risk in the financial sector. Our results reveal a correlation between non-banking financial integration and economic growth changes related to an expansion in loan recipients. The nominal interest rate significantly explains the economic growth of Pakistan. NBFI part in the liquidity procedure of budgetary resources is said to be in charge of financial development in creating nations. General consequences of the examination on NBFIs demonstrated a positive effect on the financial development of Pakistan. From policy viewpoint, the study suggests multiple policy implications to the practitioner of non-banking financial institutions and the national economy to curtail the adverse effects of economic vulnerability on national economic welfare in the public. © 2022, The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.