Revival of SME credit

Between July and August, things are brought to almost a halt across much of Europe. Italy shuts down for Ferragosto, the French vanish on les grandes vacances, and the German offices empty out. During this window, everything — deadlines, emails, occasional sovereign crisis — can wait. For Pakistani economy nerds, late summer means something completely different, though no less exciting if you are warped enough. It’s because by this time, the data for fiscal year-end starts being released, giving a complete picture of how things panned out. Of all the numbers that land in this season, it is banking that appeals to me the most for a multitude of reasons. For starters, it has had quite an enviable run the past few years and remains highly profitable even as other parts of the economy struggle. Second, its data reporting is relatively richer and granular than most other sectors. Starting with the liabilities side, total deposits reached Rs39.8 trillion by FY26, up 15 per cent over the previous year. That’s a fairly impressive haul considering the size of the industry, where any incremental change requires hundreds of billions of rupees to move the needle. Loans to SMEs crossed Rs1tr for the first time in FY26, surging by an impressive 37pc over the preceding period But these are nominal figures and are naturally helped by inflation, which was just north of 11pc in FY26. To see whether the industry has expanded its reach or not, we need a relative measure. Deposits as a percentage of GDP reached 31.4pc by June. While this marks a continuous upward trajectory over the last few years, the ratio still remains slightly short of the preceding decade’s average. Category-wise breakdown shows non-bank financial institutions to be leading the growth charts, up 48.9pc to Rs2.9tr by FY26. This is part of a recent history of the non-bank financial institutions’ balance sheet expansion, which saves the best of its movements at year ends when banking needs wild swings. Meanwhile, indi