Higher SME lending limits proposed

A think tank has proposed that the government introduce generous exposure limits of up to Rs500 million for medium enterprises (ME) and Rs100 million for small enterprises (SE), allowing banks to finance growing SMEs without regulatory caps.

Under the Clean Facility Limit programme, it proposed offering clean lending of up to Rs50 million based on cash flows, reducing collateral dependency for creditworthy SMEs.

Special Assistant to the Prime Minister (SAPM) on Industries and Production Haroon Akhtar Khan chaired a high-level meeting on small and medium enterprise (SME) lending and financial inclusion, focusing on expanding access to credit and strengthening supply chain finance mechanisms across the country.

During the meeting, the CashNow Supply Chain Finance think tank delivered a detailed presentation on the current state of SME financing in Pakistan. The presentation highlighted key challenges faced by SMEs in accessing formal financing and proposed strategic measures to enhance credit availability and financial inclusion.

The think tank also proposed a risk coverage strategy by offering 20% first-loss coverage for banks' new small enterprise loans and 10% for medium enterprise loans.

It noted that, compared to other emerging economies in the region, SME financing in Pakistan remains significantly low, underscoring the urgent need for structural reforms and innovative financial solutions.

Addressing the meeting, the SAPM said that under the leadership of Prime Minister Shehbaz Sharif, the government was actively working to expand access to credit and financing for businesses. He emphasised that millions of SMEs are operating across Pakistan and that supply chain finance has become a critical necessity for their sustainability and growth.

He observed that a majority of SMEs operate in the informal sector and often perceive formal financing as a hurdle rather than an opportunity. "Improved financing and lending facilities will empower SMEs, promote entrepreneurship and accelerate business growth," he said.

Highlighting the importance of inclusive economic development, the SAPM stressed that financing for the agricultural sector and farmers is equally vital for overall economic growth and stability.

Akhtar Khan also emphasised that banks must play a key role in extending loans to SMEs without unnecessary regulatory barriers, ensuring a more business-friendly and supportive financial environment.

To ensure practical implementation, the SAPM directed the Small and Medium Enterprises Development Authority (SMEDA) to collaborate with CashNow in developing a comprehensive business plan for SME financing and supply chain support. He further instructed SMEDA to ensure the provision of financing and lending support mechanisms for SMEs across the country.

The meeting concluded with a reaffirmation of the government's commitment to strengthening SME financing as a cornerstone of Pakistan's economic growth and industrial development.