SBP revises regulations for SME financing

KARACHI: The State Bank of Pakistan (SBP) on Friday revised regulations for small and medium enterprises (SMEs) financing to facilitate promotion of the sector.

The SBP amended prudential regulations issued in May 07, 2013 and allowed guarantees of only sponsor directors would be obtained as personal guarantee in case of limited companies.

As per other amendments, for small enterprises annual sales turnover upper limit has been increased from Rs75 million to Rs150 million and upper limit regarding number of employees has also been enhanced from 20 employees to 50 employees.

Further, an entity has to fulfill both the criteria of number of employees and sales turnover for categorization as small enterprise.

However, in cases where an entity fulfils one parameter of SE and its second parameter falls within the range prescribed for medium enterprise (ME) or above the upper limit prescribed for ME, the subject entity shall be classified as ME or commercial/corporate entity, the central bank said.

For small enterprises, maximum per party exposure limit has been increased from Rs15 million to Rs25 million. Besides, the banks/Development Financial Institutes (DFIs) are now also allowed to deduct the liquid assets held under their perfected lien for the purpose of calculation of per party exposure limit. 

Banks/DFIs have been directed to obtain a copy of audited financials from small enterprises for exposure above Rs15 million.

General Reserve requirement against non-fund based small enterprises portfolio has been abolished through latest amendments.

Furthermore, for calculation of general reserve, netting of liquid securities has been allowed, the State Bank of Pakistan said.

For immediate declassification of loans to small enterprises, the condition of 50 percent payment in cash of restructured loan amount has been replaced with 35 percent cash payment.

The State Bank of Pakistan amended the definition for medium enterprises and parameters of annual sales turnovers and number of employees revised upward.

As per revised parameter number of employee 51-250 for manufacturers in MEs and 51-100 in trading having annual sales turnover above Rs150 million to Rs800 million will be classified as the medium enterprises.

Further, an entity has to fulfill both the criteria of number of employees and sales turnover for categorization as medium enterprise, the State Bank of Pakistan said.

Medium enterprises now avail financing (including leased assets) up to Rs200 million from a single bank/DFI or from all banks/DFIs.

Besides, the banks/DFIs are now also allowed to deduct the liquid assets held under their perfected lien for the purpose of calculation of per party exposure limit, the SBP said.

The changes are applicable with immediate effect, the State Bank of Pakistan said.

However, since the banks/DFIs need to segregate their existing portfolio according to the revised definition of Small Enterprise and Medium Enterprise, banks/DFIs are allowed an implementation period upto September 30, 2016 for the purpose of existing portfolio, it added.