Financing directed toward small and medium enterprises across Pakistan increased by 33 percent year-on-year, reaching Rs. 943 billion up to June 2026, based on figures from the State Bank of Pakistan that were gathered by Arif Habib Limited.
This performance significantly outpaced the general growth rate of total bank lending, which expanded by 14 percent over the same timeframe.
On Track for SBP Target
Arif Habib Limited stated that this ongoing expansion matches the official objective set by the State Bank of Pakistan to push SME financing up to Rs. 1.5 trillion by June 2027.
Prime Minister Shehbaz Sharif urged financial institutions earlier in the year to accelerate SME lending in order to strengthen national exports.
Bad Loan Ratio Improves
The proportion of troubled loans within the SME sector, known as the infection ratio, dropped down to 11.7 percent during the April-June 2026 quarter. This metric previously reached its highest point at 23 percent in the July-September 2024 quarter.
Arif Habib Limited explained that this recovery stems largely from broad expansion in total credit, while troubled SME loans remained steady between Rs. 80 billion and Rs. 125 billion.
Even so, the brokerage cautioned that problem loans tied to SMEs could climb later as newly issued credit reaches maturity and reveals its actual repayment performance.
The Securities and Exchange Commission of Pakistan suggested increasing the borrowing caps for micro and SME accounts last month.
