IFC signs deal with Pakistan’s Habib Metro Bank to lower SME financing risks

International Finance Corporation, a subsidiary of the World Bank, has announced a new risk-sharing facility with Pakistan’s Habib Metropolitan Bank Limited to expand access to finance for small and medium enterprises (SMEs).

SMEs account for 90% of businesses in Pakistan and contribute 40% of GDP, yet fewer than 200,000 out of 3.2 million SMEs have access to formal credit, said a statement.

The new risk-sharing facility will increase lending to underserved businesses across Pakistan, including agricultural SMEs, and address the financing gap.

It will also support job creation and strengthen market competitiveness, the statement added.

IFC’s unfunded risk amount under the new agreement will be up to $40 million. The global lending body 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 the bank, the statement added.

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’s (IDA) Private Sector Window (PSW) Blended Finance Facility.

The partnership is expected to help the Habib Metropolitan Bank scale up its SME loan portfolio in line with its medium-term growth strategy.

The facility is expected 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.

Habib Metropolitan Bank continuously tries to improve access to finance for SMEs, the bank’s president and CEO, Khurram Shahzad Khan, said.

“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.”