Banks’ SME finance touches historic high of over half-a-trillion rupees

Banks’ SME finance touches historic high of over half-a-trillion rupees

KARACHI: SME financing by banks has for the first-time crossed the milestone of Rs500 billion, a statement said on Tuesday. 

SME financing was recorded at Rs513 billion at the end of CY18, compared with Rs450 billion in the corresponding period of the last year, exhibiting a growth of 14 percent.

The growth in SME financing was even more prominent in the last six months of CY18 (July-December 2018); wherein, it registered an increase of 25 percent.

This increase in SME financing attracts greater significance, keeping in view that the State Bank of Pakistan (SBP) policy rate during CY18 witnessed a rising trend.

Due to continued focus of the State Bank for facilitating SMEs access to formal sources of finance, SME financing increased significantly during CY18, the statement said.

The substantial increase in SME financing is mainly attributable to implementation of the policy for promotion of SME finance issued by the State Bank of Pakistan in December 2017.

The SME policy ensured provision of enabling regulatory environment for SME finance, prescribing SME financing targets for banks/DFIs, sensitising banks to adopt SME financing as a viable business proposition, advising banks to provide non-financial advisory services for making SMEs bankable, simplifying procedures for SME financing and introduction of new SBP refinance schemes for SMEs through banks/DFIs. 

Under the policy, so far more than 2,500 bankers have been trained through focused trainings by the training institute of the central bank. Similarly, awareness has also been created among more than 20,000 stakeholders, including SMEs through special programmes held by the SBP and SBP BSC across the country, it said.

The impact of SBP interventions resulted in significant rise in outstanding SME finance by banks / DFIs coupled with 2.3 percent decrease in non-performing SME portfolio of banks last year.

The government of Pakistan is also providing all-out support to promote SME sector. The substantial tax incentives to the banks on their incremental financing to SMEs announced in recent economic reforms bill is in line with the measures identified in government’s 100-day agenda for the development of SME sector, the statement said.

This will continue to encourage banks to fulfill the financing needs of SMEs.

The SME sector is contributing 30 percent towards country’s GDP, employ more than 80 percent of non-agricultural workforce and generate 25 percent in export earnings. Thus, the SME sector has huge potential for employment generation and poverty alleviation.