Business loans in Pakistan have become easier for smaller firms to access, with lending to small and medium enterprises (SMEs) rising 33 percent year-on-year to Rs943 billion as of June 2026, according to State Bank of Pakistan (SBP) data. That pace was well ahead of overall bank lending, which grew 14 percent over the same period.
SME credit outpaces wider bank lending
The figures, drawn from SBP data and compiled by brokerage Arif Habib Limited (AHL), show banks directing a larger share of new credit toward smaller businesses. SME financing is credit for firms that are typically smaller than large corporates—shops, workshops, exporters, and similar enterprises that need working capital or expansion funds.
AHL said the current growth is in line with the SBP’s target of expanding SME financing to Rs1.5 trillion by June 2027. Earlier this year, Prime Minister Shehbaz Sharif called for faster SME financing to help lift exports.
Bad-loan ratio improves, with a caveat
Asset quality in this segment also looked healthier on paper. The SME infection ratio—the share of non-performing loans (NPLs), or loans that borrowers have stopped paying on time—fell to 11.7 percent in the April–June 2026 quarter. That ratio had peaked at 23 percent in the July–September 2024 quarter.
According to AHL, the improvement is partly because overall SME lending has grown strongly, while the stock of SME NPLs has stayed roughly between Rs80 billion and Rs125 billion. The brokerage warned, however, that SME-related bad loans may rise later as recently issued loans mature and their true credit quality becomes clearer.
Policy push and what comes next
Last month, the Securities and Exchange Commission of Pakistan (SECP)—the corporate regulator—also proposed raising the limit on micro and SME loans. Together with the SBP’s June 2027 financing goal and the prime minister’s earlier call for faster SME credit, the policy direction points to continued pressure on banks to expand small business loans in Pakistan.
For now, the data show faster SME credit growth than the banking system as a whole, a lower infection ratio than two years earlier, and an official path toward Rs1.5 trillion in SME financing. How much of the new lending stays healthy will matter as those newer loans age.
Timeline: what has happened so far
- July–September 2024: SME infection ratio peaked at 23 percent.
- Earlier in 2026: Prime Minister Shehbaz Sharif called for faster SME financing to boost exports.
- April–June 2026: SME infection ratio fell to 11.7 percent.
- June 2026: SME lending reached Rs943 billion, up 33 percent year-on-year; overall bank lending grew 14 percent.
- Last month: The SECP proposed raising limits on micro and SME loans.
- June 2027 (target): SBP aims for SME financing of Rs1.5 trillion.
Aasan alfaaz mein
Pakistan mein chhote aur darmiyane karobar ke liye bank loans tez raftaar se barhe hain. June 2026 tak yeh lending Rs943 billion tak pahunch gai, jo pichhle saal se 33 percent zyada hai. Banks ab bari companies ke muqable SME ko zyada credit de rahe hain. Agar aap ka chhota business hai, to financing ka rasta pehle se kuch asaan dikhta hai—lekin baad mein bad loans barhne ka khatra bhi hai.
