SBP Urges Banks to Promote SME Financing

SBP Urges Banks to Promote SME Financing

Karachi, June 27, 2024 – The State Bank of Pakistan (SBP) on Thursday urged commercial banks to enhance financing for Small and Medium Enterprises (SMEs).

This call to action aligns with the global celebration of Micro, Small, and Medium Enterprises (MSME) Day, underscoring the crucial role these enterprises play in economic growth, innovation, and job creation.

To commemorate MSME Day, SBP organized a seminar themed “MSME Finance: Catalyst for Inclusive Growth.” The event, aimed at emphasizing the importance of financial support for SMEs, saw participation from Presidents and CEOs of banks/DFIs, senior SBP management, government officials, and representatives from various trade bodies.

In his keynote address, Deputy Governor Saleemullah highlighted the vital contribution of SMEs to the national economy. He pointed out that SMEs employ 80 percent of the non-agricultural workforce, contribute 40 percent to GDP, and account for over 25 percent of total export earnings. Saleemullah stressed that SBP’s focus is on fostering an environment conducive to the growth of SME financing, thereby enabling these enterprises to thrive and contribute to sustainable economic development.

As part of its Vision 2028, SBP aims to double SME financing to Rs 1,100 billion over the next five years. This ambitious target includes adding Rs 100 billion to the SME sector’s outstanding portfolio by the end of June 2025. The Deputy Governor called on all banks to actively promote SME finance and exceed the projected increase for FY 2024-25.

To further bolster SME financing, SBP has proposed that the government provide risk coverage to banks on their new SME loans. This proposal includes 20% first loss coverage for Small Enterprises (SEs) and 10% for Medium Enterprises (MEs) on fresh exposures. The necessary budget allocations for FY25 have already been made to support this initiative.

In his concluding remarks, Deputy Governor Saleemullah urged all stakeholders to renew their commitment to creating a supportive ecosystem for SMEs. He emphasized that such an environment is essential for driving economic growth and fostering innovation across the nation.

An awareness event was also held at the SBP Banking Hall to celebrate MSME Day. The event featured product displays from various commercial banks and SMEs, attracting considerable interest from visitors. Deputy Governor Saleemullah and other dignitaries visited the stalls, congratulating the organizers for their efforts in showcasing the significant contributions of MSMEs to the economy.

The SBP’s initiatives and the collaborative efforts of the banking industry and SMEs on MSME Day highlight the ongoing commitment to strengthening the SME sector, which remains a backbone of Pakistan’s economic framework.