KARACHI: Out of 3.2 million registered Small and Medium Enterprises (SMEs) in the country, only 6 percent of the units have succeeded in getting commercial bank loans under the State Bank of Pakistan’s (SBP) policy while more than 40 percent were trying to get commercial bank loan facilities.
The importance of the SME sector can be judged that their share in national export stands around 30 percent while 25 percent of these are in manufacturing of export oriented commodities. Moreover, this sector is providing 78 percent jobs to industrial workforce of the country.
Now it is the prime objective of SBP to provide congenial environment under its policy to facilitate registered SMEs with bank loans.
After concrete measures and facilitation, SMEs could help to a fair extent in overcoming country’s increasing trade deficit. There should be serious steps on cards to assist them financially for improving their potential. Further improvement in SBP designed SME policy providing easy access to loan desirous units would work manifold besides easing 9 pillars of policy- simplifying procedure for SME financing, lending and value chain financing, capacity and simplifying taxation regime for SME.
In 2006, share of SME sector in total portfolio of private credit was 17 percent, which has been reduced to 8 percent in 2017. Representatives of sector were of the view that around 90 percent SMEs were being run under sole proprietorship and efforts of SBP to help them would bear fruit.’ Ghualm Rabbani of cotton and yarn sector, Agha Saiddain of tanning sector, Rana Abdul Sattar of ginning sector, Sanaullah Khan of onyx and mining sector and members of SME body said that with less investment and capital this sector could deliver huge economic benefits to country’s overall economy.
Microfinance is in need of upgradation and should turn into SMEs bank. In addition, limit of loan being offered should also be increased from Rs 500,000 to Rs 1 million.
Female entrepreneurs should also not be ignored and there should be fair amount allocation for them.
According to SBP, Bank was making efforts to increase their number to 500,000 by 2020. Around 17 percent of available capital has been allocated for SME sector that stands to Rs 850 billion. In this connection, Small and Medium Enterprises Development Authority (SMEDA) should hold sessions for training staff of various banks dealing with SMEs on loan facility.
The government should also give incentives to SME sector like tax holiday besides reducing high rate of taxation on several categories.
Published in Daily Times, February 1st 2018.