SME financing by banking industry reaches historic level of Rs500bn

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  • Growth in SME financing was more prominent in the last six months of 2018, wherein it registered an increase of 25pc

ISLAMABAD: Small and medium enterprise (SME) financing by the banks in Pakistan has crossed the milestone of Rs500 billion for the first time in the country’s history.

SME financing was recorded at Rs513 billion at the end of 2018 as compared to Rs450 billion in the corresponding period of last year, exhibiting growth of 14pc.

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

This increase in SME financing attracts greater significance keeping in view the fact that the central bank’s policy rate during 2018 witnessed a rising trend. The historic levels were achieved due to the rigorous efforts of the State Bank of Pakistan for the facilitation of SMEs’ access to formal sources of finance.

The SME policy, issued by SBP in December 2017, ensured provision of enabling regulatory environment for SME finance, prescribing SME financing targets for banks/DFIs, sensitizing 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, more than 2,500 bankers have so far been trained by the training institute of the central bank.

Similarly, awareness was also raised among more than 20,000 stakeholders, including SMEs, through special programs held by SBP and its banking services corporations across the country.

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

It is pertinent to mention that the government is also providing complete support in the promotion of the 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 measures identified in the government’s 100-day agenda for the development of the SME sector.

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

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