Small and medium enterprises (SMEs) play an essential role in the economic success of a country. The main objective for the establishment of the South Asian Association of Regional Cooperation (SAARC) was to improve the economic conditions of this region collectively. In the 18th SAARC Summit, it was announced that Small and medium enterprises will be given special attention and SAARC countries would attempt their best to enhance small and medium enterprises performance. However due to lack of access to finance and policy bias from governments and institutions the SME sector was unable to achieve its true potential in SAARC region. The following study examines the impact of private sector credit on SMEs performance in SAARC countries because it is considered as an immediate remedy to enhance Small and medium enterprises. SME contribution to GDP has been used as a proxy variable for measuring the SMEs performance in the SAARC region. Private sector credit is measured by the total private loans made to the private sector in SAARC countries. The panel dataset for the time period of 1990 to 2018 was developed. In order to observe and analyse the data the fixed effect method (FEM) and multiple regression equation techniques was used. For empirical analysis multiple regression equations were developed for each country. The results have revealed a positive and significant relationship between private sector credit and SMEs performance in SAARC countries. This study will contribute to the existing literature by equipping policy makers about the ingredients and constraints faced by SMEs in South Asian region. In the light of this study policy makers can shift their policies to ensure that SME sector in their respective country has an adequate access to finance and consequently contribute to the development of SAARC region. Supervisor:- Dr. Nadeem Ahmed khan