President of the Pakistan Businessmen and Intellectuals Forum and All Karachi Industrial Alliance, and Chairman of the FPCCI Policy Advisory Board, Mian Zahid Hussain, has urged that the Ministry of Industries and Production, State Bank of Pakistan, FBR, SECP, and SMEDA jointly develop a uniform core definition for small and medium enterprises, establish a central SME registry, and review applicable thresholds every three years. He said a uniform identification framework would reduce compliance difficulties, improve the reliability of official statistics, and make access to financing, tax incentives, public procurement, and development programmes more transparent and efficient for businesses navigating multiple regulatory bodies with differing classification systems.
Hussain described the State Bank of Pakistan’s revised definition for micro, small, and medium enterprises as a timely, positive, and business-friendly decision, noting that the revised classifications reflect the economic realities created by rising business costs, inflation, and changes in the value of the rupee. He said the decision could enable a larger number of businesses to qualify for SME financing and related banking facilities, extending access to a segment of the business community that may have previously fallen outside existing thresholds despite genuinely operating at a small or medium scale given current economic conditions.
Under the revised definition, effective July 16, 2026, a business with annual sales of up to 30 million rupees is classified as a microenterprise, while a business with annual sales above 30 million rupees and up to 400 million rupees falls under the small enterprise category, and an entity with annual sales exceeding 400 million rupees but not more than 2 billion rupees is classified as a medium enterprise. A micro, small, or medium enterprise operating for up to five years is treated as a start-up under this framework. Hussain said the decision would particularly benefit businesses whose turnover had increased due to inflation and higher input costs, even though their underlying financial and operational capacity remained substantially below that of large corporate entities. He clarified, however, that classification as an SME would not guarantee automatic approval of financing, since banks would continue to assess loan applications based on cash flows, credit history, repayment capacity, financial position, and risk profile.
According to the latest State Bank data cited by Hussain, SME financing stood at approximately 854 billion rupees at the end of March 2026, representing only 7.63 percent of total domestic private-sector financing, while the number of SME borrowers stood at approximately 312,355. He said these figures demonstrated that considerable scope remained for expanding SME lending in Pakistan, adding that the revised prudential regulations also provide for processing a complete financing application within 15 working days, while encouraging digital applications, credit scoring, technology-based assessment, and cashflow-based lending as mechanisms to modernise how banks evaluate SME borrowers.
Hussain observed that the State Bank, SMEDA, the Federal Board of Revenue, and the Securities and Exchange Commission of Pakistan currently use different definitions, eligibility limits, and classification criteria for SMEs, creating inconsistencies that generate confusion for businesses and complicate access to financing, taxation benefits, regulatory concessions, and government support programmes. He noted that while the State Bank’s definition is primarily based on annual sales, the FBR’s SME tax regime mainly covers manufacturing businesses with annual turnover not exceeding 250 million rupees, split into two categories at the 100 million rupee threshold, while the SECP’s classification, used mainly for financial reporting purposes, considers paid-up capital, annual turnover, and employee count, with a turnover ceiling of 100 million rupees for a small private company and below 1 billion rupees for a medium-sized private company. Hussain said the State Bank’s revised turnover thresholds should be adopted as the basic national classification for SMEs, describing them as simple, updated, and neutral across business sectors.
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