UNISAME TO URGE SBP TO STRENGTHEN SME BANK & REMOVE LENDING RESTRICTIONS OF MICROFINANCE BANKS

The Union of Small and Medium Enterprises (Unisame ) will urge the Executive Director State Bank of Pakistan (SBP ) Syed Samar Hasnain to impose upon the commercial banks to facilitate the micro and small to medium sized sector to enable them import and export without subjecting them to mortgage of immovable property at a meeting at SBP on 18th September 2015.

President Unisame Zulfikar Thaver will invite the attention of the executive director SBP to the lack of risk management expertise of the commercial banks who are not inclined to finance the small enterprises without collateral.

Thaver said he would raise the issue at a meeting convened by SBP of the SME Consultants Group (SMECG) tomorrow and urge the SBP that the small enterprises can best be supported/financed by the micro finance banks (MFBs) if i) lending restrictions over Rs 500000 is removed and set at a higher amount of around Rs 2 millions;
ii) capping exposure of enterprise loans at 40% of outstanding portfolio is also removed; and
iii) financing decisions are based not on loan secureitization but cashflow analysis.
He said he would also advocate the need for lowering bank charges, letter of credit margins, reducing mark up rate on Export Refinance (ERF), discounting facilities for bills of low rating banks and third world countries.
Thaver said he would stress the need for strengthening the SME Bank, expediting the Exim Bank and the setting up of Venture Capital

Union experts have underlined the urgent need for facilitating the sector to meet the challenges faced by the sector due to global slowdown.The union has reiterated the need for SME specific bank as commercial banks are not inclined to finance the small enterprises. Zulfikar Thaver said despite all the hype by the Government during last five years lending to SME’s by private banks has gone down, not only in terms of percentage to their total financing but in actual amount as well.

The main reason in this reduction is because to private banks it’s the profit’s that counts, which does not come from engaging with SMEs but it mainly comes from consumer financing such as credit cards, personal loans, individual car loans etc where they can charge maximum interest or in Corporate/Higher Medium size loans which are less risky.

In most of the countries in ASIA like India, Japan, Malaysia, Thailand, Philippines, Singapore etc. the SME lending banks are working under their governments. Pakistan already has SME Bank Ltd under Ministry of Finance. Instead of pushing the reluctant private banks for SME financing, the Government should strengthen their own Bank by injecting the required equity into it and SME Bank Ltd may be allowed to open at least one branch in every district of Pakistan for outreach to those 93% of SME’s which does not have any access to SME financing and those 64% which doesn’t even have access to any banking facilities. There is no other solution to elevating the SME sector of Pakistan but to strengthening their own bank which may provide lending facilities at a lower rate than the other private banks to this sector. Lastly another reason that Banks in Pakistan are shy to lend to SME’s in Pakistan is our Banking Courts system as it take minimum of four years for a defaulted loan case to get decreed from the banking courts, the Government needs to look into that as well.

Posted in: Press Releases