Pakistan, Aug. 12 -- Loan defaults in Pakistan's small and medium enterprises (SMEs) sector continued to rise in the third quarter of fiscal year 2025, despite efforts by the State Bank and government to improve finance access. This trend signals growing financial challenges for the sector.

Data from the State Bank of Pakistan shows that between January and March 2025, the non-performing loan (NPL) ratio for SMEs increased to 15.39 percent from 14.16 percent in the previous quarter. This steady rise highlights difficulties in the sector, which is considered the backbone of Pakistan's economy.

Banks hesitate to lend to SMEs mainly due to high credit risk and the more attractive returns from government securities. Currently, about 60 perc...