The International Finance Corporation (IFC) has announced a new risk-sharing facility with Habib Metropolitan Bank Limited (HABIBMETRO) aimed at significantly expanding access to finance for small and medium enterprises (SMEs) across Pakistan, including those operating in the agricultural sector. The initiative seeks to address Pakistan’s longstanding SME financing gap and promote sustainable economic growth through increased private sector lending.
SMEs form the backbone of Pakistan’s economy, accounting for nearly 90 percent of all businesses and contributing around 40 percent to the country’s gross domestic product. Despite their economic importance, access to formal financing remains severely limited. Out of an estimated 3.2 million SMEs operating nationwide, fewer than 200,000 currently have access to formal credit channels, highlighting a major structural gap in financial inclusion.
The newly announced facility is structured to catalyze lending to underserved and underbanked businesses. By mitigating lending risks for the bank, the program is expected to enable HABIBMETRO to extend credit to a broader base of SMEs, including agri-centric enterprises that often face greater barriers in accessing traditional banking services. The initiative is also designed to support job creation, improve competitiveness, and strengthen the overall resilience of Pakistan’s SME ecosystem.
Under the agreement, IFC’s unfunded risk participation will amount to up to $40 million, or its equivalent in Pakistani rupees. This will cover up to 50 percent of principal losses on a portfolio of SME loans of up to $80 million to be originated by HABIBMETRO. The covered portfolio will include financing for agricultural SMEs, a segment considered critical for inclusive growth given Pakistan’s reliance on agriculture as a key economic sector.
The facility is being processed under IFC’s Small Loan Guarantee Program (SLGP) and will carry a tenor of up to six years. It is supported by a pooled first-loss guarantee provided by the International Development Association’s (IDA) Private Sector Window (PSW) Blended Finance Facility. Through the SLGP, IDA PSW offers a pooled first-loss backstop to a portfolio of IFC risk-sharing facilities in eligible countries, enabling participating financial institutions to scale SME lending while benefiting from improved pricing structures.
Momina Aijazuddin, IFC’s Regional Industry Director for the Financial Institutions Group in the Middle East and Central Asia, emphasized the importance of mobilizing private capital to close Pakistan’s SME financing gap. She noted that the targeted risk-sharing structure is intended to expand credit flows to SMEs and agricultural businesses in a way that is inclusive, sustainable, and commercially viable.
Khurram Shahzad Khan, President and CEO of HABIBMETRO, stated that the bank is focused on improving access to finance for SMEs, which he described as the backbone of the national economy. He added that the partnership with IFC will allow HABIBMETRO to broaden and diversify its SME portfolio across various regions and industrial sectors, including agriculture, in line with its medium-term growth strategy. He also expressed optimism about further strengthening the bank’s longstanding relationship with IFC.
By demonstrating sustainable and commercially viable SME lending models, the risk-sharing facility is expected to contribute to broader shifts in market practices, encouraging greater financial sector participation in productive and underserved segments of the economy. The partnership represents another step toward deepening Pakistan’s financial inclusion landscape and unlocking growth potential within the SME sector.
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