Lending to small and medium enterprises (SMEs) in Pakistan rose 33 percent year-on-year (YoY) to Rs. 943 billion as of June 2026, according to State Bank of Pakistan (SBP) data compiled by Arif Habib Limited (AHL).
This was well ahead of overall bank lending, which grew 14 percent YoY during the same period.
On Track for SBP Target
AHL said the current growth is in line with the SBP’s target of expanding SME financing to Rs. 1.5 trillion by June 2027.
Earlier this year, Prime Minister Shehbaz Sharif called for faster SME financing to boost exports.
Bad Loan Ratio Improves
The SME infection ratio, the share of non-performing loans (NPLs) in total SME lending, fell to 11.7 percent in the April-June 2026 quarter. It had peaked at 23 percent in the July-September 2024 quarter.
According to AHL, the improvement is partly due to strong growth in overall lending, while SME NPLs have stayed between Rs. 80 billion and Rs. 125 billion.
However, the brokerage warned that SME-related bad loans may rise ahead as recently added loans mature and their true credit quality becomes clearer.
Last month, the SECP also proposed raising the limit on micro and SME loans.
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