Minister seeks proposal to strengthen SME Bank’s balance sheet

ISLAMABAD: Minister for Finance and Revenue Shaukat Tarin on Thursday directed Special Assistant to the Prime Minister on Finance and Revenue to assess the requirements and prepare a proposal for strengthening the balance sheet of the SME Bank.

The finance minister was informed about the equity requirement of the SME Bank during a meeting to review the progress on the privatisation of the bank.

The meeting was informed that pre-bidding process for proposed privatisation of the SME Bank had been complete and interested parties had been shortlisted. The privatisation commission board has also completed initial discussion / consultations with the shortlisted bidders to facilitate them in the completion of their due diligence process.

Minister for Privatisation Muhammadmian Soomro informed the meeting that they were constantly in touch with the potential investors and would keep updating the finance ministry, State Bank of Pakistan and all the other relevant stakeholders of the new developments.

Meanwhile, the fourth privatisation commission board meeting of the current year discussed the status of the sale of 26 federal government properties. Initially, 23 out of 26 properties were sold through open bidding in September last year, while three properties remained unsold. Out of 23 sold properties Rs920 million was deposited against 10 properties, while the earnest money for the rest of 13 properties was forfeited on account of the failure of the successful bidders to deposit the requisite amount.

The hiring of financial advisors for the sale 17 unsold properties was approved by the board. Earlier the inter-ministerial committee approved the proposal for the hiring of FAs for the sale of remaining properties. The overall update of the privatisation plan was also discussed.

Soomro said an exclusive board meeting to discuss the matters regarding the revival of Pakistan Steel Mills and other pending issues with different department would be convened next week.

Proposed privatisation of SME Bank has been pending for a couple of years. In 2018, two renowned financial institutions were also invited to start due diligence of the bank and process was expected to complete by June-end then.

SME Bank was expected to get Rs6 billion injection upon successful privatization. SME Bank has been incurring continuous losses since 2010, resulting in total un-appropriated losses of over Rs2.7 billion, while continuing to remain exempted from the minimum capital requirement of the State Bank of Pakistan.

SME Bank has been operating with a paid-up capital of Rs2.39 billion since 2007 as the central bank exempted the bank to meet the minimum capital requirement of Rs10 billion. Founded in 2005, the bank has a small network of 13 branches across the country.

Five investors had expressed interest in response to PC’s invitation for acquisition of majority shareholding of SME Bank.

Of them, three internationally-recognised financial institutions, namely FINCA Microfinance Bank, Saudi Pak Industrial and Agricultural Investment Bank and Lanka Orix Leasing Company, were prequalified after a thorough evaluation by the commission.

Lanka Orix Leasing Company, a Sri Lanka-based financial institution, withdrew from the process, citing its inability due to strict exchange control regime of Sri Lanka.

Successive governments made attempts to privatise the bank as part of efforts to divest state stakes from lose-making public sector enterprises.

More than 10 local and foreign investors had expressed interest in acquiring up to 93.88 percent in the share capital of SME Bank. Previous attempts to restructure the bank also included two voluntary severance schemes to the employees of SME Bank in 2003 and 2009, wherein more than 800 employees opted for the VSS.