SMEs demand more credit guarantee schemes to boost up their growth

Islamabad, May 07, 2015 (PPI-OT): SMEs lending in Pakistan was just 6 percent of the total banks’ lending and government should introduce more credit guarantee schemes for SMEs to enable them achieve rapid growth and contribute more effectively in improving the economy. This was said by Muzzamil Hussain Sabri, President, M. Shakeel Munir Senior Vice President and M. Ashfaq Hussain Chatha, Vice President, Islamabad Chamber of Commerce and Industry while addressing a consultative workshop jointly organized by UNIDO and SMEDA in collaboration with ICCI on “Credit Guarantee Scheme for SMEs in Pakistan”. The representatives of various banks and large number of SMEs representatives attended the event.

They said SMEs were contributing 40% to country’s GDP and generating more than 70 percent employment in non-agriculture sector, but were facing problems in easy access to finance. They stressed that SBP should introduce more credit guarantee schemes for SMEs so that banks could feel confident in lending to SMEs for business growth. They thanked UNIDO and SMEDA for organizing this important workshop and assured that ICCI would continue to work with them on the future initiatives aimed at facilitating the growth of SMEs.

Muhammad Alamgir Chaudhry, Chief Executive Officer, SMEDA said 80,000 SMEs approached his organization for business support out of which 27 percent contacted for access to finance. He said share of SMEs in total lending was 30% in India and 32% in Bangladesh while in Pakistan was just 6% which showed that financing was a great problem of SMEs. He said lack of legal framework for recovery was the main hurdle due to which banks were reluctant to lend to SMEs.

Mr. Mukesh Kumar, National Projector Coordinator of UNIDO highlighted his organization’s initiatives in Pakistan for the development of SMEs. He said UNIDO has launched many projects in the areas of Cleantech, energy efficiency, dairy processing, olive farming and would continue to work for industrial development in Pakistan with focus on SMEs development.

Mr. Imran Ahmed, Additional Director, State Bank of Pakistan said keeping in view the significant role of SMEs in the economic development of the country, SBP was improving prudential regulations for SMEs. He said SBP would provide 40% risk coverage to banks under Credit Guarantee Scheme for providing easy financing to SMEs and would give annual targets to banks for SMEs lending. He said SBP would continue to refine its prudential regulations to facilitate the growth of SMEs in the country.

Representatives of Fincon Consultancy shared a feasibility study for setting up a pilot credit guarantee fund. They said banks were interested to give lending to sectors of their interest and SBP should introduce flexible regulations in this regard. The representatives of SMEs said strict collateral requirements were main hindrance for availing credit facility and they called upon the banks to relax collateral requirements so that SMEs could avail easy credit facility.

Mr. Ashfaq Ghuman, Joint Secretary, Ministry of Industries said government was giving great importance to SMEs and asked SMEDA to come up with new strategies in consultation of stakeholders for addressing the financing issues of SMEs.

For more information, contact:
Khalid Chaudhry
Islamabad Chamber of Commerce and Industry (ICCI)
Chamber House, Aiwan-e-Sanat-o-Tijarat Road,
Mauve Area, G-8/1,
Islamabad, Pakistan
Tel: +9251 225 0526, 2253145, 8432676
Fax: +9251 225 2950
Email: icci@brain.net.pk
Website: www.icci.com.pk