SBP urged to facilitate SMES access to finance

Karachi: The Union of Small and Medium Enterprises (UNISAME) welcomed the cut in rate by 0.50 basic points and whilst appreciating the cut in discount rate by the State Bank of Pakistan (SBP) in the monetary policy urged the central bank to focus on access to finance for the SMEs which is the main issue.

President UNISAME Zulfikar Thaver thanked the SBP for making finance affordable for the SME sector but said that access to finance for the SMEs is still a big question and SBP needs to focus on this issue. Due to lack of access to finance the efforts of the SBP to bring the interest rate down is being negated.

The union chief also appreciated the steps being taken by the SBP for establishing the Micro Finance Fund, the Mortgage Financing Company, the Warehouse Receipt Financing System and modernizing collateral management and related risk management issues.

Thaver who is a member of the SME Consultative Group (SMECG) said the SBP has made endeavours to facilitate the sector and has been very supportive in financing the sector at affordable mark up under various schemes both short term and long term and also for exports and the energy sector at special rates but the commercial banks are not comfortable in financing the sector.

Thaver also appreciated the 40% sharing of risk under the Credit Guarantee Insurance (CGI) scheme and this surely is a very positive step to make the banks comfortable in financing the SMEs. However he requested the SBP to increase its share from 40% to 50% to make it equal to the banks.

UNISAME experts are much concerned about the inflation, the borrowings by the government, the huge expenditure of the government and the deficit financing.The debt servicing is also a big burden on the exchequer and it has become a vicious circle with more borrowings every year.

Thaver said he will raise the issues of the micro and SME sector at the forthcoming meeting of the SMECG and urge the SBP executive director of the SME department Syed Samar Hassnain to increase the limit of financing an entrepreneur by the micro finance banks (MFB) to Rs 1 million from 0.5 million and remove the cap to enable even the small to obtain finance fro the MFBs.

Secondly the SME Bank which is the only SME specific bank needs to be invigorated and allowed to open more branches to cater to the sector. The much needed pay as you earn scheme financing could also be initiated by the SME Bank which needs to be strengthened and revamped under professional managers.

Thirdly the SBP needs to impose upon the banks to discount and purchase documents relating to exports to third world countries and banks of low rating to promote exports to non traditional countries of nontraditional goods.

Fourthly the venture capital fund promised in the SME policy needs to promoted through private public funding and the SBP needs to seriously work on this especially now that the Chinese investors are very keen to manufacture their goods in Pakistan.

Fifthly the union also requested further 0.5% cut in export refinancing scheme and also requested the SBP to lower the harsh penalty for non performance by borrowers under part II of ERFS if due to genuine reasons such as floods, slowdown in commodities markets and other valid reasons and extend their time for settlement.

Sixthly the banks charges are burdensome and the cost of the transaction increases due to Letter of credit charges and advising and negotiation charges. The banks are also demanding 100% margin on import L/Cs.

The SBP being a sovereign body could bring about important changes in law to protect the interest of the investors bringing in technology and interested in collaborations, joint ventures and also venture capital.