The International Finance Corporation (IFC) has announced a new risk-sharing facility with Habib Metropolitan Bank Limited (HABIBMETRO) to expand access to finance for small and medium enterprises (SMEs) across Pakistan, as well as address the country’s SME financing gap.
Overall, SMEs account for 90% of businesses in Pakistan and contribute 40% of the country’s GDP. However, less than 200,000 out of 3.2 million SMEs have access to formal credit. The new risk-sharing facility aims to catalyze lending to underserved businesses, support job creation, and strengthen market competitiveness in the SME segment.
The partnership is expected to help HABIBMETRO significantly scale up its SME loan portfolio in line with its medium-term growth strategy. By evidencing sustainable and commercially viable SME lending models, the facility anticipates to help shift financing toward productive sectors and inform broader market practices.
“Unlocking private capital at scale is essential to close Pakistan’s SME financing gap. Together with Habib Metropolitan Bank Limited, IFC is deploying a targeted risk-sharing to expand credit for SMEs and agri-centric businesses, to promote growth, which is inclusive, sustainable, and commercially viable,” said Momina Aijazuddin, IFC’s Regional Industry Director, Financial Institutions Group, Middle East and Central Asia.
“We are consciously working to improve access to finance for SMEs, which constitute the backbone of Pakistan’s economy,” said Khurram Shahzad Khan, president and CEO of HABIBMETRO. “Our partnership with IFC on this risk-sharing facility will enable us to broaden and diversify our SME portfolio across various regions and industrial sectors, including agriculture. We look forward to further strengthening our longstanding relationship with IFC,” he added.
IFC’s unfunded risk amount under the new risk-sharing facility with HABIBMETRO will be up to $40 million. Under the agreement, IFC’s risk share will cover up to 50% of principal losses on a portfolio of SME loans, including agricultural SMEs, of up to $80 million, to be originated by HABIBMETRO in Pakistan.
Processed under IFC’s Small Loan Guarantee Program, the facility will have a tenor of up to six years and is supported by a pooled first loss guarantee from the International Development Association (IDA)’s Private Sector Window (PSW) Blended Finance Facility. Through the Small Loan Guarantee Program, IDA PSW provides a pooled first-loss backstop to a portfolio of IFC risk-sharing facilities in PSW eligible countries, enabling greater scale and improved pricing for SME lending.