KARACHI - The Union of Small and Medium Enterprises (UNISAME) has urged State Bank of Pakistan (SBP) Governor Yasin Anwar not to surrender whatever autonomy the SBP had acquired over the years and not be an appendage of the Ministry of Finance (MoF) The SBP is an autonomous body and must remain as such. The SBP needs to tell the government loudly that the private sector is the backbone of the economy and needs full support of the commercial banks for their financing and the commercial banks lending to the private sector must be proportionately higher than lending to the government.
The commercial banks are expected to finance private sector trade, commerce and industry and must fulfill their role of financing private sector effectively. The banks are holding deposits of private sector and are obliged to finance the private sector in return. By just parking their funds in the public sector the banks will not grow they will become promoters of lop sided financing. The banks need to realize that the government has the National Savings Organization for obtaining funds and the banks must focus on the private sector as commercial banks.
The SBP needs to persuade the SME lending institutions to study the requirements of the sector well and develop products accordingly to facilitate them for mutual benefit as heavy lending to the government will deprive the lending institutions of genuine growth as bankers and they will be deprived of excellence in their respective field in the long run.
President UNISAME Zulfikar Thaver invited the attention of the commercial banks and financial institutions about the financial requirements of the SMEs and said the SMEs are into trading, manufacturing, services and farming and each sector has particular and specific financial requirements.
He explained that in the trading sector the SMEs are involved in imports, exports and domestic trading. In manufacturing the SMEs are manufacturing goods for exports and for the domestic markets. In services there are SME consultants and practitioners and service providers in various activities. The transport and logistics services are provided by SMEs. There are many SME builders and contractors in the housing industry.
Of course the SME farmers are into farming and processing of farm inputs and also play important role of post harvesting activities as members of the supply chain. All are involved in commercial activities and need project, running finance, bridge finance and loans for balancing, replacement and modernization. He appreciated the role of SBP and its endeavours to promote the sector and for designing various schemes for the SMEs but the banks are not inclined to take risk due to lack of risk management expertise and consider it easy and safe to finance the government who is their ever ready customer.
The Union complained that the SMEs in trading namely the exporters and importers are facing difficulties as the banks are not providing post shipment finance and the bill of lading is not considered as collateral. The banks are reluctant to discount bill of exchange and are not facilitating the traders. The banks are demanding 100% margin from SMEs for establishing letter of credits in favour of sellers and in case of exports not discounting bills drawn on overseas buyers of third world countries.
The manufacturers are not getting finance for purchase of raw materials and packing materials and semi finished goods are not accepted as collateral. Vendors to large enterprises are not accommodated with factoring facilities.
The consultants, practitioners and service providers are not provided finance against firm contracts. SME farmers are not welcomed by the banks for finance and the SME farmers even for post harvest bridge finance have to run from pillar to post to get their applications processed and limits sanctioned.
Transporters are mistrusted and enterprises offering warehousing facilities to SMEs are compelled to mortgage their immovable properties with the lenders.
The Union pointed out that the entire concept of lending has to be modified on modern lines and the outlook of the banks has to change to finance the SMEs. The banks have to understand that when they are financing many SMEs rather than few large enterprises the risk is split in financing many SMEs and the risk is more when they are financing a handful of large enterprises.
Now that the mark up rate has been lowered and cost of finance made affordable the banks are receiving applications for loans and the sector expects that the commercial banks will give serious consideration to financing the SMEs and develop products for them.
The Union expects that the SBP will impose on the banks to finance the sector rather than simply preach SME financing to banks under its control.