Key Takeaways
- The State Bank of Pakistan (SBP) has revised the definitions for Micro, Small and Medium Enterprises (MSMEs).
- New criteria include updated annual sales turnover thresholds and a separate classification for start-ups.
- These changes aim to enhance access to financial services and support for businesses at different growth stages.
The State Bank of Pakistan (SBP) has announced significant amendments to the prudential regulations governing Small and Medium Enterprises (SMEs) financing, aiming to better align regulatory definitions with current economic realities. According to a circular issued by the SBP, these changes will come into effect immediately.
Under the revised criteria, businesses with an annual sales turnover of up to Rs30 million will now be categorized as Micro Enterprises, while Small Enterprises will include firms with turnovers exceeding Rs30 million and up to Rs400 million. Previously, companies with a turnover between Rs30 million and Rs150 million were classified as Small Enterprises.
Medium Enterprises (ME) are defined under the new criteria as businesses with annual sales turnover above Rs400 million and up to Rs2 billion, compared to previous limits of above Rs150 million to Rs800 million. Additionally, start-ups will be classified based on their age, being categorized as Micro, Small or Medium Enterprises if they are less than five years old.
These amendments are part of the SBP’s broader strategy to strengthen the regulatory framework for MSMEs and facilitate better access to financial services and policy support. The SBP has set a target of increasing outstanding SME financing to Rs1.5 trillion by June 2028, while expanding the number of SME borrowers to 750,000.
The SBP has already advised banks and Development Finance Institutions (DFIs) to develop SME finance as one of their key business lines. Banks are expected to have a vision, plan, and strategy approved by their respective Board of Directors (BODs) to develop and expand their SME finance portfolio on a sustained basis.
With the efforts of the SBP, outstanding SME financing has more than doubled between June 2021 and December 2025. The number of SME borrowers increased by approximately 75 percent during this period. The SBP aims to continue these positive trends through the revised regulations and targeted financial support.
The SBP’s move is seen as a significant step towards creating a more inclusive and supportive environment for MSMEs, which are crucial for Pakistan's economic growth and job creation.
