SME lending rises to Rs513 billion in 2018

KARACHI: The small and medium enterprises (SME) financing by banks increased 14 percent, crossing Rs500 billion for the first time in Pakistan.

SME financing was recorded at Rs513 billion in 2018, compared with Rs450 billion in the corresponding period last year, exhibiting growth of 14 percent, a statement said on Tuesday.

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

This increase is of greater significance keeping in view the fact that State Bank of Pakistan (SBP) policy rate during 2018 witnessed a rising trend. Financing increased significantly last year due to the continued focus of SBP on facilitating SMEs’ access to formal sources of finance.

The substantial increase in SME financing was mainly attributable to implementation of the policy for promotion of SME finance issued by the SBP 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 SBP all across the country.

The impact of SBP interventions resulted into significant rise in outstanding SME finance by banks and development financial institutions coupled with 2.3 percent decrease in non-performing SME portfolio of banks over last year.

It is pertinent to mention that the government of Pakistan has also been providing all out support to promote the SME sector.

The substantial tax incentives to the banks on their incremental financing to SMEs announced in recent economic reforms bill was in line with measures identified in government’s 100-day agenda for development of SME sector. This would continue to encourage banks to fulfil the financing needs of SMEs.

It is worth mentioning that the SME sector contributes 30 percent towards the country’s GDP, employs more than 80 percent of non-agricultural workforce, and generates 25 percent in export earnings. Thus, SME sector has huge potential for employment generation and poverty alleviation.