Export credit insurance to help Pakistani SMEs expand global markets

SEO description: Pakistan’s new export credit insurance risk-sharing pool aims to protect SME exporters against covered non-payment risks, improve access to financing and support export-led economic growth.

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Suggested tags: SMEs, Export Credit Insurance, Pak EXIM, SMEDA, Export Development Fund, Pakistan exports, Shehbaz Sharif, Economic growth

Small and medium-sized enterprises (SMEs) are recognised as a crucial force in job creation and industrial growth. They contribute to employment generation, strengthen value addition and support broader economic expansion.

To empower SMEs to fulfil their important role in economic development, the federal government established the Small and Medium Enterprises Development Authority (SMEDA) as an autonomous body in October 1998. Since then, SMEDA has been working to promote and support SMEs by providing guidance and information and helping them gain a foothold in international markets.

The authority has also introduced initiatives and programmes to support the rapidly growing SME sector, improve access to finance, promote exports through SME certification, international accreditation and quality programmes, provide export assistance, and encourage SME subcontracting.

An estimated 5.2 million to 7.14 million SMEs operate across various sectors of Pakistan’s economy. Collectively, they employ around 78 to 80 per cent of the non-agricultural workforce. They also account for more than 30 per cent of Pakistan’s exports.

Recent developments in Islamabad following a presentation on the Export Development Fund (EDF) by the federal commerce ministry to Prime Minister Shehbaz Sharif, and the directives issued by the prime minister on the occasion, augur well for the growth, promotion and development of SMEs in the country.

The Export-Import Bank of Pakistan (Pak EXIM), under the federal finance ministry, and the Export Development Fund, under the federal commerce ministry, have recently signed what has been described as a Master Export Insurance Framework Agreement. They have also established an initial Export Credit Insurance Risk-Sharing Pool for SMEs.

According to the available details, the pool will provide export credit insurance to Pakistani SME exporters, protecting them against non-payment by international buyers arising from commercial and political risks.

This facility is expected to make SMEs more bankable, support their growth and expand their global reach. It is also aligned with Prime Minister Shehbaz Sharif’s vision of export-led economic growth through SME-focused policies and initiatives.

## Why export credit insurance matters

Whether an SME exports on open-account terms, through telegraphic transfer (TT), or under a letter of credit (LC), it may face the risk of an international buyer or the buyer’s bank failing to make the required payment.

Most Pakistani SMEs cannot easily absorb such risks. As a result, they may decline orders from prospective international buyers or limit their operations to familiar markets and buyers they consider trustworthy.

With post-shipment export credit insurance provided through the risk-sharing pool, Pak EXIM will help protect SME exporters against covered payment risks. This protection could enable them to negotiate more favourable terms with prospective international buyers, accept larger orders and enter new global markets with greater confidence. It would also help them compete more effectively with international counterparts.

Under the scheme, which is expected to be formally launched in early November 2026, SME exporters will receive protection against specified non-payment risks. The initiative is expected to help them enter new international markets, expand their open-account business, improve access to bank financing and strengthen their global competitiveness.

## Benefits for banks and financial institutions

Participating banks and development finance institutions (DFIs) will gain an additional channel for providing export credit insurance to their SME clients. The facility will allow them to offer an additional service, strengthen relationships with SME exporters and improve the protection of their SME export portfolios.

Overall, the initiative is expected to make export credit insurance more accessible and affordable for SMEs and first-time exporters. It could encourage stronger engagement between banks and export-oriented businesses, expand the insured export portfolio, improve competitiveness and contribute to export-led economic growth.

## How export credit insurance works

For the information and benefit of SME exporters, export credit insurance protects an exporter against the risk of non-payment by an international buyer. If a buyer fails to make the required payment because of a covered risk, Pak EXIM, as the insurer, will compensate the exporter in accordance with the policy terms and conditions.

This protection can give SME exporters greater confidence to sell their products to new buyers in unfamiliar markets. It can also help them access financing, potentially on more favourable terms.

Under the Pak EXIM and EDF Risk-Sharing Pool, export credit insurance will be made available to SMEs through two products: the **Comprehensive Short-Term Policy** and the **Bank Master Policy**.

This is a positive and welcome initiative to support the growth of small and medium-sized enterprises and protect their financial interests in export transactions with international buyers. In the longer term, it could help SMEs increase their contribution to Pakistan’s total exports and gross domestic product (GDP).

Such an initiative should ideally have been introduced much earlier. Nevertheless, it is a welcome step, and its timely implementation will be important to ensure that Pakistani SMEs can benefit from the opportunities it offers.