Page 51 - CMA Journal (Sep-Oct 2025)

Focus Section
Empowering SMEs through

Finance and Technology

Author: Co-Author

Abbas Raza Varayla Maria Shahab
Senior International Trade, Educationist and
Islamic Finance and Trainer at Dastak
Compliance Expert Teachers Training
(The Citizen
Foundation)

Small and Medium Enterprises (SMEs) are recognized as total exports. The sector also employs an estimated 80%
the backbone of an economy and the heartbeat of of the non-agricultural labor force in Pakistan. Despite
communities. As noted by ‘Small and Medium Enterprises their significance, SMEs only receive 6-7% of private
(SMEs) Finance – World Bank’: sector financing (Enhancing the Economic Efficiency of
Small and Medium Enterprises in Pakistan- Competition
“In developing countries, SMEs are central to economic
Commission of Pakistan, 2023).
diversification, productivity, and poverty reduction. Yet, they
face persistent challenges in obtaining the financing SME Provincial Contribution
needed to start, sustain and grow.”
Small and medium enterprises’ growth is critical to 9%
Pakistan’s economic development along with 5%
broadening trade. However, barriers such as high credit
costs, insufficient collateral, and low digital adoption
24%
have restricted their contribution to GDP. The State Bank
62%
of Pakistan (SBP), as the authoritative financial institution,
has implemented a comprehensive framework which
incorporates finance through targeted refinancing, risk
coverage, and subsidized lending along with technology
Punjab Sindh
and digital supply chain finance (DSCF), e-guarantees, Khyber Pakhtunkhwa Balochistan, Gilgit, FATA
and fintech. The State Bank of Pakistan’s initiatives within
the prudential regulatory framework highlight their 1) SME Provincial Contribution
expected impact on SME growth, which is backed by
Punjab and Sindh are densely populated provinces.
empirical data and policy references.
Punjab, due to a more concentrated population, is the
The SME sector is the cornerstone of Pakistan’s economy, undisputed leader in Pakistan’s SME sector, followed by
constituting around 40% of GDP, employing nearly 80% Sindh, largely due to the presence of the capital city,
of the non-agricultural labor force, and contributing Karachi. As per the State Bank of Pakistan in 2024, despite
around 25% of manufactured exports (Small and Medium this significant contribution, SME access to formal finance
Enterprises Development Authority- SMEDA, 2023). has historically remained below 6% of private sector
credit. SBP acknowledged this gap and has prioritized
“With over 5.2 million SMEs in Pakistan, the sector
SME financing as a core pillar of inclusive economic
represents approximately 90% of businesses,
growth.
contributing 40% to the country’s GDP and 30% to the
ICMA’s Chartered Management Accountant, Sep-Oct 2025 49