The State Bank of Pakistan (SBP) has revised the regulatory definition of small and medium enterprises (SMEs), increasing annual sales turnover thresholds by up to 2.7 times as part of amendments to its Prudential Regulations for SME Financing. The revision, which took effect in July 2026, raises the annual turnover ceiling for small enterprises from the previous PKR 150 million threshold to PKR 400 million, while the ceiling for medium enterprises has been increased to PKR 2 billion. SBP said the changes are intended to align SME classifications with current economic realities.
Under the revised framework, businesses with annual sales turnover of up to PKR 30 million are classified as micro enterprises, while those with turnover above PKR 30 million and up to PKR 400 million fall under the small enterprise category. Medium enterprises are now defined as businesses with annual turnover above PKR 400 million and up to PKR 2 billion. SBP has also introduced a start-up classification covering micro, small, and medium enterprises that have been operating for up to five years. The changes directly affect how businesses are classified for regulatory and SME financing purposes.
Karandaaz Pakistan has highlighted that while the revised thresholds account for factors including inflation and currency depreciation, Pakistan continues to operate with different SME definitions across major regulatory institutions. According to Karandaaz, the State Bank of Pakistan, Securities and Exchange Commission of Pakistan (SECP), and Federal Board of Revenue (FBR) use different approaches to defining SMEs, while the same threshold structure can also be applied across multiple sectors. This creates a policy gap that can affect how businesses are classified, assessed and supported across different parts of the financial and regulatory system.
The revision comes as SME financing remains an important part of Pakistan’s financial inclusion and business ecosystem. Karandaaz data shows that the outstanding SME financing portfolio stood at PKR 853.9 billion in March 2026, with around 312,400 SME borrowers. SME financing accounted for 7.6% of private-sector credit during the period, highlighting the role of smaller businesses within the formal financial system.
The higher SBP thresholds could bring a larger number of businesses within the scope of SME financing and related banking facilities, potentially changing how banks assess eligible enterprises. At the same time, the differences between regulatory definitions remain an issue for policymakers and businesses, particularly where classification affects taxation, corporate compliance, financing eligibility or access to support programmes. Karandaaz’s study points to the need for greater consistency in SME definitions while recognising differences between sectors and business models.
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