State Bank introduces scheme for SMEs

Aims to improve access to finance for small businesses

Our Correspondent August 17, 2021
Donor organisations trying to help Pakistan face difficulties as they cannot better plan their support in the absence of timely and credible data on SMEs. PHOTO: FILE


The State Bank of Pakistan (SBP) has introduced an innovative initiative to improve access to finance for small and medium enterprises (SMEs) in collaboration with the government of Pakistan in order to enable businesses which cannot offer security/collateral to access bank finance.

According to a statement issued on Monday, this initiative has been brand named, ‘SME Asaan Finance’ (SAAF) to emphasise the SME facilitation feature of this scheme to provide clean lending ie lending without collateral to SMEs. SAAF is a refinance and credit guarantee facility, which is aimed at assisting SMEs that are creditworthy but are still unable to access finance as they cannot offer the security required as collateral by banks.

“SBP will provide refinance to banks while the government of Pakistan will support via partial credit guarantees to the participating banks,” it said. “This support is being provided initially for three years to facilitate investments by banks in technology, infrastructure and team building specialised in SME lending, after which SME financing by banks is expected to be sustainable without SBP or government support.”

Speaking about the collateral free lending scheme, Finance Minister Shaukat Tarin said, “The Ministry of Finance welcomes and supports this innovative initiative of the State Bank, which would enable SMEs without collateral to access bank finance.”

“We look forward to seeing strong participation from commercial banks to take this initiative forward,” he added. The SME sector plays a pivotal role in Pakistan’s economy and is estimated to contribute 40% to GDP and 25% in export earnings.

However, despite this SMEs find it difficult to access formal bank finance as SME financing stood at Rs444 billion as of March 31, 2021, which is only 6.6% of total private sector credit.

Published in The Express Tribune, August 17th, 2021.

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