Karachi, October 8, 2024 – The State Bank of Pakistan (SBP) has taken a significant step towards promoting Small and Medium Enterprises (SMEs) by revising the per party exposure limits for these businesses.
The new limits are aimed at enhancing access to financing for SMEs, which are a critical component of Pakistan’s economy, driving employment, innovation, and economic growth.
In a circular issued on Tuesday, the SBP outlined the updated regulations for per party exposure limits for both Small Enterprises (SEs) and Medium Enterprises (MEs). These revisions are intended to provide greater flexibility and financial support to SMEs, enabling them to obtain higher financing from banks and Development Finance Institutions (DFIs).
Revised Exposure Limits:
1. Small Enterprises (SE) – R-2 Category:
Under the revised guidelines, a Small Enterprise can now access financing of up to Rs 100 million from a single bank or DFI, or cumulatively from all banks and DFIs. The new limit allows SEs to secure larger amounts of credit, facilitating expansion and operational growth. In calculating the exposure limit, banks and DFIs are permitted to deduct the value of liquid assets (such as bank deposits, certificates of deposit, Pakistan Investment Bonds, Treasury Bills, and National Savings Scheme securities) that are held under a perfected lien. This effectively increases the amount of financing available to SEs, giving them better financial leverage.
2. Medium Enterprises (ME) – R-3 Category:
For Medium Enterprises, the revised per party exposure limit has been set at Rs 500 million, allowing MEs to access significantly larger funds. Like the SEs, MEs can avail of financing (including leased assets) from a single bank or DFI, or from all financial institutions collectively. The same provisions regarding deductions for liquid assets apply, enabling businesses to potentially secure additional financing based on the value of their secured deposits or investments.
These revisions are effective immediately, and all banks and DFIs have been directed to ensure strict compliance with the updated limits. The move is part of the SBP’s broader efforts to stimulate SME growth, recognizing the sector’s pivotal role in contributing to Pakistan’s GDP and creating jobs across various industries.
By increasing the per party exposure limits, the SBP aims to bridge the financing gap that has historically hindered SME growth. With more accessible credit, small and medium businesses are expected to have greater opportunities for expansion, innovation, and increased participation in both domestic and international markets.
The SME sector in Pakistan is considered the backbone of the economy, and these reforms are expected to have a positive impact on overall economic development.