KARACHI: The State Bank of Pakistan (SBP) has revised its regulatory framework concerning small and medium enterprises (SMEs), including a significant redefinition of what constitutes a start-up.
According to a notification issued on Tuesday, the SBP announced that any business entity up to five years old will now be classified as a start-up, regardless of its age being previously considered a limiting factor.
These amendments have been introduced to bring the SBP’s regulatory definitions in line with the SME Policy 2021, as notified by the Government of Pakistan. Under the revised guidelines, any business with an annual turnover of up to Rs150 million will qualify as a small enterprise. If such an entity is five years old or younger, it will be categorized as a start-up small enterprise.
Similarly, a business with annual sales turnover ranging from above Rs150 million to Rs800 million will be considered a medium enterprise. If it is within the first five years of operation, it will now be classified as a start-up medium enterprise.
This updated classification is particularly important for businesses seeking credit, as start-up entities often receive special considerations or support under various development finance schemes. By expanding the start-up definition, the SBP aims to create a more inclusive environment for emerging businesses.
These new regulations take effect immediately for all new financing. However, financial institutions including banks and Development Finance Institutions (DFIs) have been given time until June 30, 2022, to align their existing portfolios with the revised SME definitions.
The SBP has directed all banks and DFIs to ensure widespread dissemination of the updated regulations across their branches and offices. The central bank also warned that failure to comply with the revised Prudential Regulations could result in punitive action under the Banking Companies Ordinance (BCO), 1962.
This strategic move is expected to facilitate easier access to finance for start-ups, enabling them to scale and contribute to economic growth.