SVG image inside circle

A pattern will work. You just have to give the <image> a size. Unlike HTML, SVG images default to width and height of zero.

Also, if you want the image to scale with the circle, then you should specify a viewBox for the pattern.

<svg id="graph" width="100%" height="400px">

  <!-- pattern -->
  <defs>
    <pattern id="image" x="0%" y="0%" height="100%" width="100%"
             viewBox="0 0 512 512">
      <image x="0%" y="0%" width="512" height="512" xlink:href="https://cdn3.iconfinder.com/data/icons/people-professions/512/Baby-512.png"></image>
    </pattern>
  </defs>
    
  <circle id="sd" class="medium" cx="5%" cy="40%" r="5%" fill="url(#image)" stroke="lightblue" stroke-width="0.5%" />
</svg>

This is an alternative to SVG, you don't actually need SVG for this. You can accomplish your goal with image tag itself.

.avatar {
    vertical-align: middle;
    width: 20px;
    height: 20px;
    border-radius: 50%;
    border: solid 5px red;
}

<img src="https://connectoricons-prod.azureedge.net/kusto/icon_1.0.1027.1210.png" alt="Avatar" class="avatar">

Refer here for live demo

Try this,

use patternUnits="userSpaceOnUse" and to set height="100%" width="100%" of <image>

 <defs>
    <pattern id="image" x="0" patternUnits="userSpaceOnUse" y="0" height="100%" width="100%">
      <image x="0" y="0" width="500" height="500" xlink:href="http://www.viralnovelty.net/wp-content/uploads/2014/07/121.jpg"></image>
    </pattern>
  </defs>

Demo