PBF advocates 25% fund allocation for SMEs

Urges banks to prioritise sector, calls it backbone of economy

LAHORE:

The Pakistan Business Forum (PBF) has proposed that a minimum of 25% of concessional financing, including the Export Finance Scheme, be exclusively allocated to Small and Medium-sized Enterprises (SMEs) in the export sector in the upcoming budget. This strategic allocation will not only support small sector development but will also promote a more inclusive and sustainable economy.

During a meeting with members of Pakistan Cotton Ginners Association, PBF President Khawaja Mehboob ur Rehman, said that the State Bank of Pakistan (SBP) may review its credit policies by fixing a special quota to finance the SMEs. He noted that only the large industries have been availing the government’s major concessional export loaning facilities, which leaves very limited financing for SMEs. He highlighted that SMEs were the backbone of the economy, contributing around 40% to the national gross domestic product (GDP).

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He observed that despite their significance, over 5 million SMEs face a significant credit gap, receiving only 7% of private sector credit, far below neighbouring countries like Bangladesh (25%) and India (18%). “To achieve near to our neighbour countries targets we must advocate for targeted and fixed SME allocations in concessional financing schemes, particularly those aimed at the export-oriented sector,” he remarked.

He further stated that SBP has launched various policies for the promotion of SME finance, but the required results are still awaited. He lamented that it was unfortunate that banks were always reluctant to provide financing to SMEs, highlighting that their financing continued to exhibit negative growth.

The PBF president emphasised that the government will have to take solid measures to strengthen the industry, especially the SMEs, saving the livelihood of millions of workers associated with the small industries. The government will also have to make a visible reduction in markup rate to help grow the businesses, particularly the SME sector, as Pakistan needs millions of jobs annually.

He underscored the critical role of SMEs in driving sustainable economic development in Pakistan. With an estimated 5.2 million businesses, the sector is a cornerstone of the economy, fostering employment, growth, and export diversification.

Published in The Express Tribune, April 7^th, 2024.

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