Karachi, September 17, 2015 (PPI-OT): The Union of Small and Medium Enterprises has reiterated the need for SME specific bank as commercial banks are not inclined to finance the small enterprises. President UNISAME Zulfikar Thaver said despite all the hype by the Government during last five years lending to SME’s by private banks has gone down, not only in terms of percentage to their total financing but in actual amount as well.
The main reason in this reduction is because to private banks it’s the profit’s that counts, which does not come from engaging with SMEs but it mainly comes from consumer financing such as credit cards, personal loans, individual car loans etc where they can charge maximum interest or in Corporate/Higher Medium size loans which are less risky.
In most of the countries in ASIA like India, Japan, Malaysia, Thailand, Philippines, Singapore etc. the SME lending banks are working under their governments. Pakistan already has SME Bank Ltd under Ministry of Finance. Instead of pushing the reluctant private banks for SME financing, the Government should strengthen their own Bank by injecting the required equity into it and SME Bank Ltd may be allowed to open at least one branch in every district of Pakistan for outreach to those 93% of SME’s which does not have any access to SME financing and those 64% which doesn’t even have access to any banking facilities.
There is no other solution to elevating the SME sector of Pakistan but to strengthening their own bank which may provide lending facilities at a lower rate than the other private banks to this sector. Lastly another reason that Banks in Pakistan are shy to lend to SME’s in Pakistan is our Banking Courts system as it take minimum of four years for a defaulted loan case to get decreed from the banking courts, the Government needs to look into that as well.
For more information, contact:
Union of Small and Medium Enterprises (UNISAME)
75/1 3rd Commercial Street,
Phase IV, D.H.A., Karachi, Pakistan
Cell: +92-300-8245307, +92-321-8245307