Islamabad: A new proposal from a think tank suggests that the Pakistani government should introduce higher exposure limits for medium and small enterprises, with limits set at Rs500 million and Rs100 million, respectively. This initiative aims to allow banks more freedom in financing small and medium-sized enterprises (SMEs) without the constraints of regulatory caps.
According to Small and Medium Enterprises Development Authority, the proposal is part of a broader Clean Facility Limit programme, which includes offering clean lending of up to Rs50 million based on cash flows, thereby reducing the dependency on collateral for creditworthy SMEs. The proposal was discussed in a high-level meeting chaired by Haroon Akhtar Khan, Special Assistant to the Prime Minister on Industries and Production. The meeting focused on expanding access to credit and strengthening supply chain finance mechanisms across the country.
During the session, the CashNow Supply Chain Finance think tank presented an analysis of the current state of SME financing in Pakistan, outlining challenges and suggesting strategic measures to enhance credit availability. As part of the proposal, the think tank recommended a risk coverage strategy that offers 20% first-loss coverage for new small enterprise loans and 10% for medium enterprise loans. It highlighted that SME financing in Pakistan is significantly lower than in other emerging economies in the region, emphasizing the need for structural reforms.
Akhtar Khan noted that under Prime Minister Shehbaz Sharif's leadership, the government is actively working to improve credit access for businesses. He stressed the crucial role of supply chain finance in ensuring the sustainability and growth of millions of SMEs operating across Pakistan, many of which are part of the informal sector and view formal financing as a challenge. He asserted that improved lending facilities would empower SMEs, promote entrepreneurship, and accelerate business growth.
The Special Assistant also highlighted the importance of financing for the agricultural sector, stating that it is vital for overall economic growth and stability. He urged banks to extend loans to SMEs without regulatory barriers to foster a more supportive financial environment. To implement these proposals, Akhtar Khan directed the Small and Medium Enterprises Development Authority to collaborate with CashNow on a comprehensive business plan for SME financing and supply chain support.
The meeting concluded with a commitment to strengthening SME financing as a cornerstone of Pakistan's economic growth and industrial development.