FAISALABAD - The Small & Medium Enterprises (SME) Policy of State Bank of Pakistan (SBP) will play a pivotal role in providing congenial environment to 3.2 million registered SMEs to play their productive role in the overall development of Pakistan, said Tasleem Qazi, the director of DFSD, SBP Karachi.

He was addressing the first awareness session on SME Policy of SBP in Faisalabad Chamber of Commerce & Industry (FCCI). He underlined the importance of SME sector and said that its share in national export was 30% that is also contributing 25% towards the manufacturing of export-oriented items. Similarly, the SME sector was also providing 78% jobs to industrial workforce of Pakistan. He said that there were thousands of unregistered SME units in additionto  3.2 million registered ones which could help Pakistan overcome its increasing trade deficit.

“However, we have to provide them with maximum incentives to achieve the cherished objective,” he added. He said that out of total registered SMEs, 90% fall under the category of sole proprietorship and SBP was making serious efforts to help these units to grow and become big units as early as possible. He further said that out of these, the owners of 6% units are already getting bank loans while 40% of them are dealing with the banking sector.

He said that majority of the remaining were shy of getting bank loans on the apprehension of falling prey to the tax net. Continuing, he said that in 2006, the share of SME sector in total portfolio of private credit was 17% which has been reduced to 8% in 2017. He said that SBP had designed SME policy to provide easy access to these units to enjoy hassle-free access to the capital.

“This policy has 9 pillars including  improvement in regulatory framework, up-scaling through microfinance bank, risk mitigation strategy, simplified procedure for SME Financing, programme-based lending and value chain financing, capacity building and awareness creation, handholding of  SME, non financial advisory services and simplifying taxation regime for SME,” he added.

He said that SME sector was getting 8% share from the total private credit while number of those getting benefits out of it are 174,000. He said that SBP was making serious endeavours to increase their numbers to 5 lac by 2020. He said that 17% of the available capital has been allocated for SME sector which will be Rs850 billion. He said that necessary instruction has been issued to banks to facilitate the SME sector and from January this year, the retail portfolio of different banks will be allocated on the basis of provinces which will be devolved to district level in later phase.

“Similarly, an equitable amount will be allocated for male and female entrepreneurs,” he added. He said that SBP was also considering a proposal to upgrade microfinance bank into full-fledged SMEs bank. “The limit of SMEs loan will also be increased from Rs0.5 million to Rs1 million,” he added.

Giving detailed presentation on SME policy, he said that the banks have been directed to process the SME loan application as early as possible and in this connection; the processing period for loan applications has been reduced from 30 to 15 days only. However, the applications of medium sized units will be processed within 25 days, he said. “In case of non-acceptance of application, the banks will be duty bound to give a cogent reason for the rejection of application,” he said.

He further said that National Institute of Banking & Financing has also been directed to provide necessary training to the bank staff dealing with SME sector. “Meanwhile, SMEDA has also been taken on board to provide much needed training to the concerned staff of various banks,” he said and added that State Bank of Pakistan, Security Exchange Commission of Pakistan and SMEDA are also collaborating to facilitate the SME sector.

He said that a centre of excellence will be established for SME sector. “It will remain in touch with the global SME sector and any new development in the sector would be immediately passed on to the concerned quarters.

He said that SBP was requesting government to review the policy however FCCI should also exert pressure on the government to withdraw the tax.

Earlier in his address of welcome, Faisalabad Chamber of Commerce & Industry (FCCI) President Shabbir Hussain Chawla said that access to capital was pre-requested for industrial and commercial activities and in this connection SBP has introduced many finance schemes with a focus on SME sector.

He also mentioned that SBP and FCCI are also enjoying good working relations and the awareness section is indicative of our mutual cooperation. He hoped that it will help SME sector to have access to the capital for their future growth.

Mr Shabbir Hussain Chawla also pointed out that some textile units have fallen victim to circumstances in the wake of global meltdown and hence SBP should relax its prudential regulations for their immediate revival.