Why does God give us pain?

I give Islamic inforation to my colleague in Office. One of my friend is Jain, they belive there is no God and no creator, because as per her in islam also, when u do good things you get good return and when you do bad things, you get punishment. That means (as per her) that whatever we are doing we are facing, then where god comes in picture to give us good things. So her basic question is Why God gives us pain. As per islam, he is most merciful, then all our sins should be forgivable. Please reply.