Pakistan is seeking to expand formal financing for small and medium-sized enterprises (SMEs) by encouraging banks to develop lending solutions tailored to specific business clusters, the Small and Medium Enterprises Development Authority (SMEDA) said, according to The News International.

SMEDA and the State Bank of Pakistan (SBP) held a seminar bringing together financial institutions, industry representatives and other stakeholders to discuss the findings of cluster-based lending studies and ways to translate them into viable credit opportunities.

The studies assess the business models, financial and operational characteristics, borrowing requirements, risks and growth prospects of selected SME clusters, providing banks with sector-specific information to improve lending decisions.

SMEDA has profiled seven SME clusters under the initiative and prepared detailed studies identifying financing gaps and potential lending interventions, according to the report.

SMEDA CEO Nadia Jahangir Seth said stronger sector-specific research could help financial institutions better understand SME businesses and develop commercially viable financing products suited to their needs.

SMEDA General Manager Raja Hassanien Javaid said improving SME competitiveness and access to finance remained key priorities. SME financing rose 30.5% year on year to $3.2bn by June 2026, while the number of SME borrowers increased 15.18% to 318,585.

The authority is also working to improve SME financial readiness through literacy programmes, pre-feasibility studies, financing helpdesks and digital tools.

SMEDA has conducted 147 financial literacy sessions across Pakistan, reaching more than 5,000 SMEs, while its financing helpdesks received 131 loan applications in the 30 days before the seminar.

The authority is also developing an SME Credit Scoring Services Model to provide banks with a standardised supplementary tool for assessing SME credit risk. The model has been tested by participating banks through the Pakistan Banks’ Association (PBA).

The initiatives are aimed at strengthening links between SMEs and banks and increasing the flow of formal credit to smaller businesses.