SBP introduces wholesale financing framework for SEs, SFs

October 29, 2026 (MLN): The State Bank of Pakistan (SBP) has introduced a wholesale and agency financing framework under which banks can lend to small enterprises (SEs) and small farmers (SFs) through microfinance banks (MFBs), non-bank microfinance companies (NBMFCs) and non-bank finance companies (NBFCs), with the loans covered under the federal government’s risk coverage schemes, according to SH&SFD Circular No. 7 of 2026.

The circular, addressed to the presidents and CEOs of all banks, aims to widen access to finance for SEs and SFs.

The financing that banks provide under the framework will be reported as part of their portfolios against SEs and SFs.

It will fall under the Federal Government Risk Coverage Schemes for SMEs and Small Farmers, notified through SH&SFD Circular No. 02 of 2024 dated August 1, 2024, and ACFID Circular No. 02 of 2025 dated August 20, 2025.

How the framework works

Banks, referred to as participating financial institutions (PFIs), will use the outreach and financing capabilities of eligible institutions, referred to as agent financial institutions (AFIs).

The AFIs will handle loan origination, appraisal, approval, monitoring, recovery and reporting. Loans can be booked directly in the PFI’s books (agency arrangement) or in the partner institution’s books (wholesale arrangement).

In both cases, loans will be identifiable and traceable, and reported to the PFIs through API-based integration.

Eligibility criteria for AFIs

PFIs must select AFIs that meet all the eligibility conditions.

An AFI must have operational self-sufficiency of at least 100%, SME and agriculture non-performing loans (NPLs) of 5% or less, and unqualified audited financial statements for the last two years. If loans are booked on its own books, it must comply with the minimum capital adequacy ratio (CAR) or capital requirement.

It must also have at least three years of experience in enterprise or agriculture financing, sound governance and risk management systems, including a functional board, independent internal audit, a compliance function and a robust credit origination, monitoring and reporting system, and compliance with anti-money laundering and countering the financing of terrorism (AML/CFT) requirements aligned with SBP and SECP rules.

Maximum financing limits

These limits apply to individual borrower exposure originated under the arrangement, based on the respective AFI’s financing capacity, underwriting and monitoring capabilities.

Risk monitoring and NPL threshold

PFIs must receive regular, preferably real-time, digital data from AFIs on portfolio outstanding, portfolio at risk, NPLs and collection efficiency.

If the NPLs of an AFI under the wholesale arrangement reach 10 %, the PFI must freeze further disbursements and take remedial measures as per the facility agreement.

 PFIs must also maintain independent oversight by their risk management, compliance and internal audit functions, and keep a clear segregation of duties.

PFIs with wholesale arrangements must keep a separate ledger of accounts for their wholesale portfolio and show a breakup of retail and wholesale portfolio against SEs and SFs in their regulatory reporting.

AFIs booking loans under the wholesale arrangement must likewise disclose their gross portfolio against SEs and SFs, with a breakup of the portfolio developed under wholesale arrangements with PFIs and that developed through their own resources.

Claims

PFIs must submit claims under the framework in line with its provisions and remain solely responsible for due diligence and for confirming that the underlying SE and SF financing qualifies for risk coverage.

Before submission, each claim must be verified and endorsed by the PFI’s business unit, compliance function and internal audit.

Eligible losses will be determined under the applicable Prudential Regulations for SME Financing and Agriculture Finance, and all other claim processing matters will follow the relevant SBP circulars.

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