The State Bank of Pakistan (SBP) has started a major reform plan to make loans easier for small and medium businesses (SMEs). The goal is to help SMEs access finance in a simple, fair, and lasting way. The central bank wants to remove hurdles that keep small businesses from getting much-needed funds from banks.
Currently, SMEs face major issues despite supporting Pakistan’s economy in big ways. These businesses create 80% of non-farm jobs and make up 40% of the GDP. Yet, they receive just 6% of private bank loans. The SBP now wants to change this by improving loan rules and helping banks use modern tools and tech.
The timing is crucial, as job growth has been slow, with only 1.7% average economic growth in the past three years. Pakistan has around 5 million SMEs, which are key to job creation and boosting exports. The government hopes to increase exports to $60 billion in five years, and SME support will play a big role in that plan.
To support this, the SBP asked all banks in February to make lending easier for small businesses. Falling interest rates—dropping from 22% to 11%—are expected to help banks give more loans. The SBP is also urging banks to partner with fintech firms to meet the needs of SMEs more effectively.
Moreover, the SBP has invited public suggestions to update SME finance rules based on market needs. As part of its “Vision 2028,” the central bank aims to double SME financing to Rs11 trillion in five years. These steps are designed to empower small businesses and fuel economic growth across Pakistan.