The International Finance Corporation (IFC) has announced a new risk-sharing facility with Habib Metropolitan Bank Limited (HABIBMETRO) to scale up lending to small and medium enterprises (SMEs) across Pakistan, including businesses operating in the agricultural sector. The initiative is designed to address Pakistan’s persistent SME financing gap and expand access to formal credit for underserved enterprises that form the backbone of the country’s economy.
SMEs account for nearly 90 percent of businesses in Pakistan and contribute around 40 percent of the national GDP. Despite their significant economic role, fewer than 200,000 out of an estimated 3.2 million SMEs currently have access to formal financing. The newly launched facility seeks to unlock capital for these businesses by reducing the credit risk borne by the bank, thereby encouraging increased lending to productive sectors.
Under the agreement, IFC’s unfunded risk exposure will be up to $40 million, in Pakistani rupee equivalent. The risk-sharing arrangement will cover up to 50 percent of principal losses on a portfolio of SME loans of up to $80 million to be originated by HABIBMETRO. The portfolio will include agricultural SMEs, a segment often constrained by limited collateral, volatile income streams, and restricted access to structured financing solutions.
The facility has been processed under IFC’s Small Loan Guarantee Program (SLGP), which is structured to support financial institutions in expanding credit access to smaller businesses. The agreement will have a tenor of up to six years. It is supported by a pooled first-loss guarantee from the International Development Association’s (IDA) Private Sector Window (PSW) Blended Finance Facility. Through this structure, IDA PSW provides a backstop across a portfolio of IFC risk-sharing facilities in eligible countries, enabling higher lending volumes and improved pricing terms for SME borrowers.
According to IFC, mobilizing private capital at scale remains critical to narrowing Pakistan’s SME financing gap. Momina Aijazuddin, IFC’s Regional Industry Director for the Financial Institutions Group in the Middle East and Central Asia, stated that the partnership with HABIBMETRO is aimed at deploying targeted risk-sharing mechanisms to expand credit access for SMEs and agri-focused enterprises. She emphasized that the initiative is intended to support growth that is inclusive, sustainable, and commercially viable.
HABIBMETRO’s President and CEO, Khurram Shahzad Khan, noted that SMEs represent the foundation of Pakistan’s economic activity and that improving their access to finance remains a strategic priority for the bank. He added that the partnership with IFC will enable HABIBMETRO to broaden and diversify its SME portfolio across different regions and industrial sectors, including agriculture, while strengthening its longstanding relationship with the multilateral institution.
The collaboration aligns with HABIBMETRO’s medium-term growth strategy, which includes scaling its SME loan book and enhancing its presence in priority sectors. By demonstrating sustainable and commercially viable SME lending models, the facility is expected to influence broader market practices and encourage greater participation in SME finance across Pakistan’s banking sector.
HABIBMETRO, a subsidiary of Habib Bank AG Zurich, operates more than 560 branches nationwide and has a strong footprint in trade finance, SME lending, and digital banking services. IFC, a member of the World Bank Group, operates in over 100 countries and committed a record $71.7 billion in fiscal year 2025 to private companies and financial institutions in developing markets, aiming to leverage private capital and strengthen private sector-led development.
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