SME Default Rate Rises to 15.39% in FY25 Q3

SME Default Rate Rises to 15.39% in FY25 Q3

| 12-Aug-2025

Islamabad, August 12, 2025, 02:26 PM PKT — Despite government and State Bank of Pakistan (SBP) initiatives to enhance financing access, Pakistan’s small and medium enterprises (SME) sector faces a soaring default rate, hitting 15.39% in Q3 FY25 from 14.16% last quarter, per SBP data, signaling mounting financial strain. Total SME financing for working capital loans dropped to Rs311.33 billion by March 2025 from Rs332.8 billion in December 2024, reflecting acute short-term lending challenges, while fixed investment stagnates at Rs2.42 trillion. The rise in non-performing loans (NPLs) deters banks from SME lending due to higher credit risk, favoring government securities where 60% of bank assets are parked—well above the 20% threshold flagged as risky in developing nations.

To counter this, SBP launched the Challenge Fund for Technology Adoption and Digitalisation of SME Banking (CFS), offering grants for tech-driven solutions, requiring banks to contribute 15% of project costs and complete within eight months. Web context on SME financing shows persistent gaps, while posts found on X reflect concern—some hope for tech relief, others doubt impact. Critically, the narrative of “financial inclusion” may mask structural weaknesses—web data hints at past failures, and X sentiment suggests distrust in effective rollout, pointing to ongoing risks.

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