The central bank allows banks to partner with microfinance institutions and non-bank lenders to expand credit access, with financing limits of up to Rs5 million for small enterprises and Rs2 million for agricultural borrowers.
KARACHI, October 28, 2026: The State Bank of Pakistan (SBP) has introduced a financing framework to improve access to credit for small enterprises and small farmers through wholesale funding and agency arrangements with eligible financial institutions.
Under SH&SFD Circular No. 7 of 2026, banks, referred to as Participating Financial Institutions (PFIs), can use microfinance banks, non-bank microfinance companies and non-bank finance companies as Agent Financial Institutions (AFIs) to extend financing to eligible borrowers.
READ MORE: SBP revises equity investment limits for banks and DFIs
The financing will be covered under the Federal Government’s risk coverage schemes for small and medium enterprises and small farmers, previously notified through SBP circulars issued in 2024 and 2025.
Eligibility and responsibilities
Eligible AFIs must meet specific requirements, including operational self-sufficiency of at least 100%, non-performing loans of no more than 5% in SME and agricultural financing, and unqualified audited financial statements for the previous two years.
They must also have at least three years of experience in enterprise lending or agricultural financing, sound governance and risk management systems, and compliance with anti-money laundering and counter-terrorism financing regulations.
AFIs will identify borrowers, conduct credit assessments and verification, execute financing agreements, maintain documentation, monitor repayments and recover overdue amounts.
Participating banks must conduct due diligence on partner institutions, establish financing limits, monitor portfolio quality and maintain secure application programming interface (API) integrations to exchange borrower and financing data in real time or near real time.
Maximum financing limits
The framework sets the following maximum loan limits for individual borrowers:
• Non-bank microfinance companies (NBMFCs): Rs1 million for small enterprises and Rs500,000 for agricultural borrowers.
• Non-bank finance companies and microfinance banks (NBFCs/MFBs): Rs5 million for small enterprises and Rs2 million for agricultural borrowers.
Under wholesale arrangements, financing may be recorded in the partner institution’s books, while agency arrangements allow loans to be recorded directly in the participating bank’s books.
Risk controls and government coverage
Banks must monitor overdue financing and non-performing loans. Further disbursements must be frozen under a wholesale facility if an agent institution’s non-performing loans reach 10%, with remedial measures required.
The framework also requires separate portfolio records and reporting for wholesale and agency financing.
Participating banks remain responsible for verifying claims under the government’s risk coverage facility and ensuring that financing meets the applicable prudential regulations and framework requirements.
The initiative is intended to use the outreach of specialised financial institutions to broaden credit access for small businesses and farmers while maintaining lending oversight and risk controls.
READ MORE: SBP revises capital rules for banks’ mutual fund investments