The State Bank of Pakistan (SBP) has issued new directives requiring commercial banks, microfinance banks, and Development Finance Institutions (DFIs) to implement end-to-end digital onboarding solutions for Small and Medium Enterprises (SMEs). This move is aimed at modernizing SME financing, improving operational efficiency, and expanding financial inclusion in Pakistan’s digital banking ecosystem.
Under the updated prudential framework, banks and DFIs are permitted to leverage technology-based verification tools such as GPS, geo-tagged data, and video KYC recordings to authenticate both the SME business owners and their operational premises. This marks a significant step toward digitizing the account opening and credit assessment process, reducing reliance on manual documentation and in-person verification.
All SME-related credit documentation, including renewals, declarations, and agreements, can now be submitted in digital form. Banks are also mandated to execute e-agreements using secure digital signature platforms. Additionally, institutions may rely on confirmations issued by anchor companies or validated partners, such as manufacturers, distributors, digital aggregators, and online platforms, to expedite onboarding.
The SBP guidelines emphasize reusing account opening information during credit assessments, which minimizes duplication and enhances the customer experience. Where statutory or regulatory data is available from authorized third-party sources, banks are no longer required to collect the same information directly from SME applicants, further streamlining the process.
Monitoring SME creditworthiness and performance is another key component of the new framework. Banks and DFIs must establish digital loan monitoring mechanisms to track operating and financial activities, which may include digital or physical verification, account activity analysis, and evaluation of stock reports. Financial institutions are also encouraged to develop their own digital credit scoring models or partner with fintechs to assess SMEs, using data such as transactional records, cash flow statements, digital supply chain activity, and other alternative verifiable data sources.
Under the revised SME definitions, enterprises are categorized based on annual sales turnover: Micro Enterprises up to Rs. 30 million, Above Micro Enterprises Rs. 30–150 million, and Medium Enterprises Rs. 150–800 million. Startups less than five years old are classified as Startup SEs or Startup MEs. Small Enterprises, including Micro and Above Micro, may avail funded and non-funded credit facilities of up to Rs. 100 million, while Medium Enterprises can access financing of up to Rs. 500 million from one or multiple institutions.
The SBP also allows banks and DFIs to deduct the value of liquid assets held under perfected lien, such as bank deposits, Certificates of Investment, Pakistan Investment Bonds, Treasury Bills, and National Savings Scheme securities, when calculating per-party exposure limits. This further enables banks to optimize credit allocation while maintaining prudential standards.
This directive aligns with Pakistan’s broader agenda to digitize banking services, promote SME growth, and ensure technology-driven financial inclusion across the country. By integrating video KYC, GPS verification, and alternative data solutions, the SBP aims to make SME financing faster, more secure, and more accessible to a broader segment of the economy.
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