SBP Revises SME Financing Limits to Boost Growth in Pakistan

KARACHI: The recent notification from the State Bank of Pakistan (SBP) marks a significant milestone in the financial landscape of the country, particularly for Small and Medium Enterprises (SMEs). The Pakistan Banks’ Association (PBA) has expressed its strong approval of the SBP's decision to revise the per-party exposure limits for SMEs. This move is seen as a crucial step towards enhancing credit access, which is vital for the growth and sustainability of these enterprises.

Under the newly revised framework, Small Enterprises (SE R-2) can now secure financing of up to Rs. 100 million from a single bank or collectively from all banks and Development Finance Institutions (DFIs). This is a substantial increase that will allow small businesses to access the funds they need to expand and innovate. Furthermore, banks and DFIs are now allowed to deduct liquid assets—such as bank deposits, certificates of deposit, Pakistan Investment Bonds (PIBs), Treasury Bills, and National Saving Scheme (NSS) Securities—held under their perfected lien when calculating the per-party exposure limit. This flexibility is expected to encourage banks to lend more freely to small enterprises.

Similarly, Medium Enterprises (ME R-3) can now access financing, including leased assets, up to Rs. 500 million. Just like their smaller counterparts, medium enterprises will benefit from the ability of banks and DFIs to deduct liquid assets held under their lien for exposure limit calculations. These changes are effective immediately, and all banks and DFIs have been instructed to comply strictly with the new regulations.

The revised exposure limits, which were recommended by the PBA’s SME Task Force, are anticipated to play a pivotal role in advancing financial inclusion and strengthening the SME sector in Pakistan. The PBA has been actively working with the SBP and other key stakeholders to create an ecosystem that supports the growth of agriculture, SMEs, and digital technology sectors. While the full potential of this ecosystem may take time to unfold, it is essential for promoting sustainable growth in these critical areas of the economy.

Commenting on this development, Zafar Masud, Chairman of the PBA, stated, “SBP’s enhanced SME financing limits will significantly improve access to funding opportunities, accelerating innovation, financial inclusion, and entrepreneurship. PBA is committed to collaborating with the SBP to drive SME growth and foster economic progress across key sectors.”

The SBP's revised financing limits for SMEs represent a forward-thinking approach to economic development in Pakistan. By facilitating easier access to credit, the government is not only empowering small and medium enterprises but also laying the groundwork for a more robust and diverse economy. As these businesses thrive, they will contribute to job creation, innovation, and overall economic stability, which is essential for the country's future growth.