Page 52 - CMA Journal (Sep-Oct 2025)

Focus Section

SBP adopted a strategic approach that combines SBP also requires banks to build dedicated SME
prudential regulation, subsidized financing schemes, divisions, train competent credit officers in SME
digitalization, and risk mitigation mechanisms to appraisal, and incorporate digital scorecards and
enhance SME credit penetration. simplified due diligence mechanisms. These
measures streamlined SME financing practices and
2) Targeted Financing and Risk Mitigation Schemes
aligned them with prudential governance standards.
a) Recapitalization and Concessional Facilities- SBP
operates recapitalization facilities designed to make 3 Regulatory Framework and Supervisory Reforms
capital more accessible and affordable. The State Bank of Pakistan’s Prudential Regulations
• SME Asaan Finance: A collateral-free lending for SME Financing 2024 provide the regulatory
program launched by SBP to provide refinanc- foundation for SME banking. The prudential
ing to banks at concessional rates and share regulations simplify credit approval processes, set
partial credit risk, enabling financing up to Rs. 10 exposure limits, and establish clear classification and
million for small enterprises. This scheme was provisioning standards. They emphasize:
active for 3 years (SBP, 2021). • Use of digital loan origination and
• Refinance Facility for Redevelopment of documentation
SMEs: Supports technological upgradation and • Application of automated credit scoring models
modernization by offering low-cost term financ-
ing for machinery (SBP, 2021). The chief target is • Expedited decision timelines not exceeding 25
to elevate the SME sector through investment in working days from the date of complete
technology, methods of production, and reduc- application submission
ing borrowing costs. These schemes directly These reforms reduce transaction costs for both
address key barriers such as high collateral banks and borrowers and enhance consistency in
requirements and high markup rates.
risk management practices.
b) Risk Coverage Scheme (2024–2029)- Considering
4) Technology as a Catalyst: Digital Supply Chain
the SMEs pivotal role in economic growth and
Finance and e-Guarantees
employment creation, SBP launched a Risk Coverage
Scheme for SMEs in August 2024, effective till June a) Digital Supply Chain Finance (DSCF)- Digital
2029, which provides first-loss coverage to banks. As integration can serve as a facilitator for SME growth
per SH&SFD Circular No. 02 of 2024: by accelerating access to finance within the supply
chain mechanism. In this regard, a landmark policy
• Government will absorb credit loss (principal
portion) on banks’ fresh exposure against SMEs step was taken through SBP’s Circular SH&SFD No. 01
of 2024, directing all banks to:
• 20% first-loss coverage against banks’ fresh
• Establish a dedicated Supply Chain Finance
exposure to SEs
(SCF) function
• 10% first-loss coverage against banks’ fresh
exposure to MEs • Launch a digital SCF solution within six months,
either in-house or via fintech collaboration
The scheme covers loans for up to five years with a
cap of Rs. 25 million for small enterprises and Rs. 200 • Submit a capacity-building plan within three
million for medium enterprises. The scheme covers months (SBP, 2024)
all types of loans, including working capital, running This initiative places SMEs within customer-centric
finance, and long-term loans. “According to a State value chains, allowing them to obtain working
Bank of Pakistan (SBP) notification on Thursday, the capital against confirmed receivables or payables. As
risk coverage scheme aims to double the out- per the Global Trade Review (2024), this regulation
standing financing to SMEs to Rs. 1.10 trillion over could unlock a USD 9 billion SCF market potential in
the next five years, starting July 1, 2024, compared to Pakistan.
the current financing to this critical sector of the
economy (The Express Tribune, 2024). b) Digital Guarantees and e-Issuance- SBP encourages
digital submission of risk coverage and guarantee
c) Credit Guarantees and Training- Earlier frame- claims, e-KYC onboarding, and electronic document-
works, such as the Credit Guarantee Scheme for ation of SME loans. Such automation helps reduce
Small and Rural Enterprises, offered 60% coverage response time, minimize manual errors, and enhance
for collateral-deficient borrowers (SBP, 2017).
audit transparency.

50 ICMA’s Chartered Management Accountant, Sep-Oct 2025