SBP to Launch Challenge Fund to Promote SMEs and Innovations

The State Bank of Pakistan (SBP) is launching a Challenge Fund for SMEs (CFS) to find and support innovative solutions for SME banking in Pakistan.

The goal of CFS is to encourage banks to develop innovative technological solutions for the Small and Medium Enterprises (SMEs) sector’s banking needs. This will help increase the access and usage of financial services by the SME sector. Going forward, it can also play a major role in digitizing financing and payments.

Digital SME banking includes a broad range of financial services accessed and delivered at affordable costs through digital channels. It can catalyze the improvement of living standards by providing affordable financing options and encouraging entrepreneurship. It is also estimated that the market potential of Digital Finance Services in Pakistan will cross $36 billion by 2025 to provide a seven percent boost to the GDP, create four million new jobs, and result in $263 billion new deposits.

This potential can only be achieved through a robust and efficient Digital Financial Services (DFS) ecosystem, which is why the SBP is focusing on leveraging technology in payments in modernizing lending platforms. The SBP is also promoting an enabling regulatory environment for new players and forming new contractual relationships between financial institutions and third parties.

The funds are intended to support banks in leveraging technology and innovation to either develop new or amend the existing financial products, services, and delivery platforms that will enhance access to finance to the SME sector. The purpose of this challenge fund is to help:

  • develop and implement innovative ideas to increase SMEs’ financial inclusion;
  • develop user-friendly and cost-effective innovative banking solutions for business entrepreneurs;
  • develop and integrate key offerings with other players in the banking system with the interoperability option;
  • devise novel solutions to create easy digital access to formal financial services, including savings products, lending services, pensions, insurance tools, remittances, etc.
Potential Areas for a Grant Under CFS

The fund provides an opportunity for banks to experiment with or implement innovative digital banking products and services to improve access to finance to SMEs either individually or in collaboration with collaborating institutions such as Non-banking financial institutions (NBFIs)/Fintech/Electronic Money Institutions (EMIs)/software houses.

The scope of CFS will focus, but not be limited to the following areas:

  • SME banking solutions
  • Digital payment solutions for SMEs
  • Developing e-commerce/marketplace
  • Digitizing loans application and credit management

The above-mentioned areas will focus on enhancing financing to the SMEs sector, with more focus on marginalized segments such as start-ups, women-led SMEs, and underserved areas.

Commercial banks (conventional and Islamic) are eligible to apply for CFS. The banks can also apply in partnership with any collaborating institution but the applicant bank will maintain lead responsibility.

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