ISLAMABAD: The Pakistan Banks’ Association (PBA) has announced plans to create an index for small and medium-sized enterprises (SMEs) within the next year, designed to provide a benchmark for the financial sector and help increase access to financing for SMEs across the country.
Mir Nejib ur Rehman, an advisor for the PBA, shared the news at a press conference on Wednesday, explaining that the index would be based on market data collected over the coming year. It will provide valuable insights to banks, enabling them to make informed decisions about increasing lending to SMEs. The index will be updated every six months to offer an up-to-date understanding of the SME sector for lenders.
There are approximately 5 million SMEs in Pakistan, employing around 80% of the non-agriculture labor force. These businesses contribute to 40% of Pakistan’s GDP and account for 25% of the country’s exports, according to the State Bank of Pakistan’s (SBP) National Financial Inclusion Strategy (NFIS) 2024-28 report, published in January 2025.
However, only 155,000 SMEs, or about 3% of the total, are currently receiving financing from the banking sector, and SME financing represents just 6% of the total domestic private sector credit.
The SBP is committed to enhancing SME participation in the formal financial system, aiming to double SME financing to Rs1.1 trillion by 2029. As part of this effort, the SBP is encouraging banks to use technology to expand financing options for SMEs.
In addition to this initiative, the PBA announced that it will host its first-ever conference, the ‘Pakistan Bank Summit 2025’ (PBS’25), on February 24-25, 2025, in Karachi. The event will focus on guiding banks to increase financing to the private sector and will provide a platform for sharing global best practices with local industry players.
Zafar Masud, Chairman of PBA, emphasized that banks will concentrate on four key areas to increase financing: SMEs, agriculture, housing, and the digital sector. He noted that targeting these sectors will support economic growth and help stimulate the private sector.
Atif Bajwa, Chairman of the PBS’25 Steering Committee and CEO of Bank Alfalah, also highlighted the importance of the SME sector in driving the domestic economy. He urged the banking sector to strengthen its role in meeting financial needs and supporting trade and investment.
Bajwa dismissed perceptions that banks were profiting excessively, stating that over 50% of their net earnings are paid in taxes to the government, with remaining profits being comparable to other sectors in Pakistan.
