Prime Minister Shehbaz Sharif has instructed the State Bank of Pakistan (SBP) and the Finance Ministry to take punitive action against banks that delay loans to three priority groups: farmers, small and medium enterprises (SMEs) and beneficiaries of the Prime Minister's Apna Ghar housing scheme.

Speaking at a review meeting in Islamabad focused on facilitating credit to these sectors, Sharif said expanding financing for SMEs, housing and agriculture is a core government priority intended to boost the economy and create jobs for young Pakistanis.

Why the Government Is Targeting Credit Delays

The directive follows months of complaints from agricultural cooperatives, SME owners and home-buyers that commercial banks are applying excessive documentation requirements, high interest spreads and slow processing times. Delayed credit has been linked to lower crop yields, stalled factory expansions and unfinished housing projects, all of which undermine the government's growth targets for 2026-27.

By signalling that banks will face penalties, the prime minister aims to align private-sector lending behaviour with the state's broader development agenda, which includes raising exports, increasing value-addition in agri-products and delivering affordable housing to low-income families.

What the Prime Minister Said About Each Priority Sector

In his remarks, Sharif highlighted the economic potential of SMEs, describing them as engines of growth that can raise exports and generate employment. He called agriculture "the backbone of the national economy" and noted that the government is working to boost agricultural exports through value-addition initiatives.

Regarding the Apna Ghar scheme, the prime minister explained that the programme not only provides homes but also stimulates construction-related industries such as cement, steel and interior fittings. He stressed that banks play a critical role in private-sector development and must therefore extend the same level of cooperation to these priority sectors as they do to government-backed projects.

Directives Issued to Finance Ministry and SBP

Sharif ordered the finance minister to resolve financing-related issues faced by stakeholders in the SME, agriculture and housing sectors and to develop a comprehensive action plan. He also instructed the SBP and the Federal Board of Revenue (FBR) to work together on tax matters affecting SMEs and exporters, while drafting a risk-coverage strategy that would make SME lending less risky for banks.

The prime minister's order includes three concrete measures for the SBP:

  • Improving regulatory frameworks to reduce unnecessary compliance burdens.
  • Introducing risk-sharing mechanisms that allocate part of the credit risk to the government.
  • Expanding digital facilities to streamline loan applications and monitoring.

SBP's Digital Push: SME Connect Portal

As part of the digital expansion, the SBP recently launched the SME Connect portal (available at https://smeconnect.sbp.org.pk). The platform allows businesses to submit loan applications online, track approval status and receive notifications about required documentation. Early data suggest that the portal has reduced average processing time from 45 days to 22 days for participating banks.

Digitalisation is intended to address two chronic problems: lack of transparency in loan-approval pipelines and the high cost of manual verification. By automating credit-scoring algorithms and linking directly to the SBP's risk-share fund, the portal also aims to lower the cost of capital for borrowers.

Current Lending Volumes in Priority Sectors

During the meeting, officials presented the latest figures as of 23 October 2026:

  • Apna Ghar housing loans: Rs. 511 billion approved for 86,899 applications, with Rs. 91 billion already disbursed to 15,584 beneficiaries.
  • Housing finance overall: Rs. 455 billion extended to 187,317 borrowers.
  • Agricultural lending: Rs. 1,329 billion reaching roughly 3.5 million people.
  • SME financing: Rs. 1,148 billion benefiting 342,458 businesses.

These numbers show that, while substantial credit has been deployed, the government still sees room for growth. Targets have been set to raise agricultural and SME lending to Rs. 1,500 billion each by the close of fiscal year 2027.

Risk-Sharing and Credit Guarantees Explained

The government's risk-sharing scheme works by creating a guarantee fund that covers a portion of any default on loans to the three priority sectors. When a bank issues a loan, it can register the transaction with the SBP's guarantee system. If the borrower defaults, the fund reimburses the bank up to a pre-agreed percentage, typically 40-60 % of the outstanding principal.

This arrangement lowers the perceived risk for banks, encouraging them to offer lower interest rates and more flexible repayment schedules. It also aligns with international best practices recommended by the World Bank for expanding credit to underserved sectors.

Impact on Stakeholders

Farmers stand to benefit from quicker access to working capital for seeds, fertilizers and equipment, which can improve crop cycles and reduce post-harvest losses. SMEs will see faster financing for inventory purchases, machinery upgrades and export-related expenses, helping them meet rising demand in regional markets.

For home-buyers under the Apna Ghar scheme, faster loan approvals mean reduced waiting times for construction completion and earlier occupancy, which in turn fuels demand for building materials and creates construction-site jobs.

What Comes Next: Implementation Timeline

The finance ministry is tasked with delivering a detailed action plan within the next 30 days. The plan will outline specific penalties for banks that miss prescribed processing timelines, ranging from fines to temporary restrictions on new loan approvals.

The SBP will publish revised regulatory guidelines by the end of the current quarter, incorporating the risk-share framework and digital-portal integration requirements. Banks are expected to submit compliance reports quarterly, allowing the central bank to monitor adherence and impose sanctions where necessary.

Stakeholders are advised to monitor the SBP's official website and the Finance Ministry's circulars for updates on the penalty structure and the timeline for the risk-share fund's operational launch.

Practical Takeaways for Borrowers and Banks

Borrowers should register their loan applications through the SME Connect portal or the dedicated Apna Ghar online system to benefit from faster processing and greater transparency. They should also ensure that tax filings with the FBR are up to date, as the new risk-share mechanism will require proof of compliance.

Banks need to review internal credit-approval workflows, train staff on the digital portals, and adjust loan-pricing models to reflect the reduced risk under the government guarantee. Early adopters of the digital system may qualify for lower supervisory fees from the SBP.

Overall, the prime minister's directive signals a decisive shift toward a more collaborative credit environment, where public policy and private banking work in tandem to unlock growth in agriculture, SMEs and affordable housing.