In a significant move aimed at modernizing and enhancing financial access for small and medium enterprises (SMEs), the State Bank of Pakistan (SBP) has released a draft of revised Prudential Regulations (PRs) for SME financing. These updates, now open for public consultation, represent a broader effort by SBP to reshape the regulatory landscape for SME lending into a more inclusive, responsive, and technology-driven framework.
The central bank has conducted a comprehensive review of the existing prudential guidelines governing SME finance. This review comes amid a growing recognition that SMEs, which form the backbone of Pakistan’s economy, require a more adaptive financial ecosystem to thrive in the evolving market conditions. In response, SBP has proposed both new regulations and amendments to existing ones, with a focus on making the PRs more principles-based rather than prescriptive.
One of the major objectives behind the revision is to dismantle structural barriers that have historically limited the flow of credit to the SME sector. In this context, SBP has emphasized encouraging financial institutions to harness modern technologies and build collaborative partnerships with fintech companies and other non-banking service providers. This approach is expected to create more innovative and accessible financing solutions, particularly for underbanked and informal segments of the SME community.
The draft regulations have been made publicly available on the official SBP website, allowing stakeholders to review and submit feedback from June 5 to June 20, 2025. Interested parties are encouraged to provide their input via the designated email address (SME.PRs@sbp.org.pk) using the feedback form provided on the SBP portal. This consultative process aims to ensure that the final regulatory framework aligns closely with market dynamics and the evolving needs of SMEs.
SBP has actively called on a wide range of stakeholders—including commercial banks, development finance institutions, fintechs, business chambers, trade associations, policy analysts, and members of the general public—to participate in the consultation process. Their insights, the central bank notes, will be instrumental in fine-tuning the PRs to better facilitate SME growth and long-term sustainability.
The revised regulations are expected to introduce a more facilitative policy environment that promotes responsible lending, encourages digital innovation, and ultimately supports the financial resilience of the SME sector. The move also signals SBP’s commitment to fostering a regulatory ecosystem that adapts to technological shifts and supports national goals of financial inclusion and economic diversification.
With SMEs contributing significantly to employment and GDP in Pakistan, the proposed changes in SME financing regulations could serve as a critical lever in unlocking their potential. The public consultation period marks an important opportunity for all stakeholders to influence the direction of SME policy in the country. The outcome is poised to reshape the landscape of business financing in Pakistan for years to come.