SME financing rises 14pc


SME financing rises 14pc KARACHI: Bank financing to small and medium-sized enterprises (SMEs) rose 14 per cent to Rs297.5 billion in 2015-16, a State Bank of Pakistan’s (SBP) report said on Friday.

However, despite economic significance of SMEs, they have been unable to receive their due share from formal source of financing which hampers the development of SME sector, the central bank said.

According to State Bank’s quarterly SME Finance Review, banks and development finance institutions’ (DFIs) financing to these enterprises rose by 5pc in April-June compared to the previous quarter.

Facility-wise breakdown shows that the working capital financing constituted 66pc of outstanding SME financing, followed by fixed investment and trade finance with shares of 23pc and 11pc, respectively.

The facility-wise distribution of borrowers depicted that fixed investment was the most popular facility among SMEs which managed to pick 52pc of borrowers while working capital had 45pc share of borrowers, a decline from 49pc as of March 31.

The report showed that the share of trading was 27pc, manufacturing 36pc and the service sector 37pc in outstanding SME financing.

“After assigning of SME financing targets, there would be an addition of Rs81bn in SME portfolio of banks or DFIs and it is expected to increase from Rs305bn at the end of December 2015 to Rs386bn at the end of December 2016,” said the report.

The report said that keeping in view the potential of SMEs, the central bank has introduced targets for SME finance for banks and DFIs with effect from Jan 1, 2016. The targets have been set on the basis of size of the banks in terms of assets, branch network, existing SME finance portfolio and the capacity of a bank to achieve the required targets.

The share of private-sector banks in outstanding SME financing was the highest at 67pc in April-June, a rise of three percentage points compared to the previous quarter.

Loans of up to Rs5 million had a share of 36.7pc in the total SME financing during the quarter. They covered 93pc of total SME borrowers, most of whom availed loans of up to Rs500,000.

SME financing by Islamic banks and Islamic banking divisions (IBDs) of conventional banks rose 18pc compared to the previous quarter. IBDs showed an increase of 46pc when compared to the previous quarter. A year-on-year comparison showed a rise of 27pc in share of Islamic banking divisions of conventional banks.

It was observed that conventional banks had a share of 93pc of SME financing and 7pc was the share of Islamic banking institutions.


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