Small and medium businesses in Pakistan will find it easier to borrow from banks, after State Bank of Pakistan (SBP) Governor Jameel Ahmad announced a package of measures at the Lahore Chamber of Commerce and Industry (LCCI). The headline change is that the limit for loans without collateral has been raised from Rs10 million to Rs50 million, and a new online portal for SME loan applications opens on 1 November.
The State Bank is Pakistan’s central bank. It sets the policy interest rate, supervises banks and designs the rules under which banks lend. Small and medium enterprises, known as SMEs, are the small factories, workshops, shops and service firms that employ a large share of Pakistan’s workforce but often struggle to get bank loans.
What collateral is, and why the change matters
Collateral is an asset, such as property, that a borrower pledges to a bank as security for a loan. If the borrower cannot repay, the bank can claim the collateral. For many small business owners, arranging collateral has been the hardest part of borrowing, because they may not own property a bank accepts. Raising the collateral-free limit to Rs50 million means a business can now borrow up to that amount without pledging such an asset, although the bank will still check the business and its ability to repay.
The definition of an SME has also been widened. The annual turnover limit for a small enterprise has been raised from Rs150 million to Rs400 million, and for a medium enterprise from Rs800 million to Rs2 billion. Turnover is a business’s total sales in a year. Businesses with turnover of up to Rs2 billion can now use SME financing facilities, bringing larger firms into the easier-lending net.
The numbers behind the announcement
Outstanding financing to SMEs has grown from Rs491 billion in June 2024 to about Rs1,110 billion in June 2026, while the number of SME borrowers has risen from 177,000 to around 325,000. The application process has been simplified too: the SBP, together with the Small and Medium Enterprises Development Authority (SMEDA) and commercial banks, has cut the loan form to a single page, and the SME Connect Portal will let entrepreneurs apply online from home and track their application at every stage from 1 November.
Exporters get help as well. The limit under the Export Refinance Scheme, through which banks lend cheaply to exporters, has been raised from Rs1 trillion to Rs1.5 trillion, including Rs300 billion set aside for SME exporters, and the cabinet has approved a 10-year long-term export financing scheme. Under a risk-sharing arrangement, the government will bear the first 20 percent of losses on loans to small businesses and the first 10 percent on loans to medium businesses, which should encourage banks to lend. Housing finance was also mentioned: under a scheme revised in March 2026, banks approved Rs521 billion for around 80,000 applicants within six to seven months, against outstanding housing finance of Rs251 billion before the revision.
What this means
For an ordinary small business owner, the practical message is that the door is more open than before, but a loan is still a loan. The bank will still judge whether the business can repay, and with the policy interest rate at 12 percent, borrowing is not cheap. The real test will be whether banks actually approve more loans at the higher collateral-free limit, and whether the new portal works smoothly from 1 November. The LCCI president also proposed a joint financing model for 1,000 selected SMEs, to find their obstacles and build a system that could be repeated across the country. For readers thinking of applying, the sensible first step is to check the portal when it opens and to compare what different banks offer, rather than rushing into debt.
Sources: Business Recorder, Express Tribune, UrduPoint (APP). Written in our own words for information only — not investment advice.