State Bank of Pakistan launches challenge fund to boost digitalization in SMEs

The State Bank of Pakistan (SBP) has unveiled a new Challenge Fund aimed at fostering technology adoption and digitalization among small and medium enterprises (SMEs). This initiative is part of the central bank’s ongoing efforts to enhance financial access for the SME sector, which is widely recognized as a cornerstone of the economy.

In a circular issued on Saturday, the SBP said the fund will offer grants for specific banking solutions to SMEs. This financial help will allow banks to create specific technological instruments that will address the banking requirements of these enterprises.

The SBP and the government have consistently emphasized their commitment to supporting SMEs, which need substantial support for large-scale development.

Key Areas of Focus for the Challenge Fund

• Developing of Loan Origination and Processing Systems exclusively for SMEs.
• Digital product development which includes digital scorecards, effective supply chain management, and account opening solutions.
• Strengthening the online tools that deliver financial literacy, enabling customers to make sound banking/financial decisions.
• Optimizing or creating new online banking, mobile banking, internet banking, and customer interface applications.
• Promoting new technology solutions that are not offered by existing financial service providers to SMEs.

Eligibility and Grant Details

Commercial banks, both conventional and Islamic along with any other institution regulated by the SBP is eligible to apply for grants under this program. Banks may also work with EMIs and Fintech firms, but the main burden will be on the applying bank.

The grant funding will be fixed according to the financial requirements of the proposals that will be submitted, and each grantee will be expected to provide 15% of the total project cost. The amounts awarded in grants may vary depending on the originality and caliber of the submissions; however, each bank is eligible for only a single grant. The Challenge Fund outlines that the projects selected for support are expected to be executed within a timeframe of eight months.

The SBP is currently inviting banks to express their interest in this initiative. Banks are anticipated to adhere to the internal standards set by the SBP as they aim to revolutionize the SME financing landscape nationwide.