Rs200 million credit line for SMEs remains unutilised

Lack of interest from stakeholders deprives SMEs of funds.

PESHAWAR: A credit line of Rs200 million, provided by the Khyber-Pakhtunkhwa government to the Bank of Khyber (BoK) for extending loans to small and medium enterprises (SMEs) at 9% mark-up, has stood unutilised one and a half years since the release of the amount.

According to sources in BoK, the funds were provided to the bank in June 2011 following the signing of a memorandum of understanding, in which BoK, the Khyber-Pakhtunkhwa Chamber of Commerce and Industry (KPCCI) and the provincial government were stakeholders.

“Government kept its promise and provided Rs200 million to BoK, but KPCCI failed to keep its word and did not send us a single case in the past 18 months,” said a bank official. “The aim was to provide soft loans at a mark-up of just 9%, but the funds remained unutilised.”

According to the procedure set by the government, the trade body in every market will recommend loan cases to KPCCI, which will review the requests and then sent them to BoK.



“All the stakeholders must abide by the rules and regulations,” he said.

Industrialists Association Hayatabad ex-chairman Numan Wazir told The Express Tribune that lack of interest on the part of all stakeholders had caused a great loss to SMEs.

“I would blame all of them – the provincial government, BoK and KPCCI. They should have provided soft loans to small traders and industrialists to promote business activities in the war-ravaged province,” he said.



On the one hand, he said, trade organisations were blaming banks for not providing loans to the traders in K-P and on the other hand a large amount of Rs200 million given for the purpose could not be put to use.

When approached, KPCCI President Dr Muhammad Yousaf Sarwar said a variety of issues came in the way of SME credit line, top of them was the high mark-up rate.

“When you give someone Rs1 million, it means that he is a small trader and 9% mark-up is quite high for him,” he said, adding complicated paperwork also kept traders and industrialists away from the facility.

“We recommend that loans should be provided at only 2% mark-up, so that more and more small traders could apply for it,” he added.

Commenting on the issue, BoK Managing Director Bilal Mustafa said KPCCI had failed to process a single case in the past 18 months as per procedure agreed in the MoU, which resulted in funds remaining unutilised.

“All the stakeholders agreed that KPCCI will process the cases and send them to BoK, but we have received not a single case. Under the rules, we cannot provide direct loans from the credit line,” he added.

Published in The Express Tribune, December 18^th, 2012.