KARACHI: Businessmen urged the banking regulator to introduce a low-mark up financing scheme for Small and Medium Enterprises (SMEs) through commercial banks with low Advance-to-Deposit ratios.
Talking to media, the President Federal B Area Association of Trade and Industries (FBATI) Shaikh Muhammad Tasheen said the commercial banks are reluctant to provide financing to small and medium industrial units having the pent-up potential to generate their business and generate jobs.
He mentioned that the banking regulator intended to facilitate SMEs with various measures, including the extension per party exposure limit for small units by up to Rs100 million and up to Rs.500 million per party financing for medium-sized industrial units recently along with risk coverage scheme for SMEs, however, he added, these schemes are ineffective until higher mark-up rates are reduced substantially.
It is an irony that banks are aggressively lending to corporate clients to avoid penalties from the government on the low ADR which utilized benefits from the banking system through various specialized schemes in the past, he added. The government and the banking regulator should introduce more long-term financing schemes at low-mark-up rates for SMEs to expand their operations for local and export markets, he added.
Over 5.2 million SMEs are operating in Pakistan with 40 percent in GDP and 25% in overall exports, if this sector is supported through financing schemes, ease of doing business, and development of infrastructure, the economy is set to grow at an accelerated pace, President FBATI mentioned.
Dr. Noman A Said- an IT exporter, said the banks should extend financing to the tech companies which are small and medium in size and active in exports of ICT services.
IT companies need capital to scale up their operations and business to next level, investing in their systems, including hardware and equipment. He said banks should provide financing on easy terms to the tech sector that brings in foreign exchange to country rather than corporate sector tycoons. Banks should forge partnerships with tech companies to enhance their foreign reserves while providing affordable financing options for enhancing their export of IT and IT-enabled services, a win-win situation, Dr. Noman Said, who is the CEO SI Global, added.
By October-end 2024, banks carried out aggressively lending to a segment of customers showing a quantum jump in advances growing by Rs.1.47 trillion in October, hence the ADR of the banking sector also improved to 44.2% from 39%.
According to data released by the State Bank of Pakistan (SBP), the total advances of the banking sector surged to Rs.13.77 trillion by the month of October as compared to advances of processing months Rs.12.30 trillion reported by September 2024, showing a marked increase of 11% month-o-month. In September 2024, the banking sector advances grew by Rs.497 billion to Rs.12.30 trillion from advances value stood at Rs.11.80 trillion in August.
Banks maintained excessive liquidity due to the high deposits received from the customers. However, banks must lend or finance over Rs.1. 5 trillion to meet the ADR threshold of 50% and to avoid heavy penalties by end of December 2024.
KARACHI: Businessmen urged the banking regulator to introduce a low-mark up financing scheme for Small and Medium Enterprises (SMEs) through commercial banks with low Advance-to-Deposit ratios.
Talking to media, the President Federal B Area Association of Trade and Industries (FBATI) Shaikh Muhammad Tasheen said the commercial banks are reluctant to provide financing to small and medium industrial units having the pent-up potential to generate their business and generate jobs.
He mentioned that the banking regulator intended to facilitate SMEs with various measures, including the extension per party exposure limit for small units by up to Rs100 million and up to Rs.500 million per party financing for medium-sized industrial units recently along with risk coverage scheme for SMEs, however, he added, these schemes are ineffective until higher mark-up rates are reduced substantially.
It is an irony that banks are aggressively lending to corporate clients to avoid penalties from the government on the low ADR which utilized benefits from the banking system through various specialized schemes in the past, he added. The government and the banking regulator should introduce more long-term financing schemes at low-mark-up rates for SMEs to expand their operations for local and export markets, he added.
Over 5.2 million SMEs are operating in Pakistan with 40 percent in GDP and 25% in overall exports, if this sector is supported through financing schemes, ease of doing business, and development of infrastructure, the economy is set to grow at an accelerated pace, President FBATI mentioned.
Dr. Noman A Said- an IT exporter, said the banks should extend financing to the tech companies which are small and medium in size and active in exports of ICT services.
IT companies need capital to scale up their operations and business to next level, investing in their systems, including hardware and equipment. He said banks should provide financing on easy terms to the tech sector that brings in foreign exchange to country rather than corporate sector tycoons. Banks should forge partnerships with tech companies to enhance their foreign reserves while providing affordable financing options for enhancing their export of IT and IT-enabled services, a win-win situation, Dr. Noman Said, who is the CEO SI Global, added.
By October-end 2024, banks carried out aggressively lending to a segment of customers showing a quantum jump in advances growing by Rs.1.47 trillion in October, hence the ADR of the banking sector also improved to 44.2% from 39%.
According to data released by the State Bank of Pakistan (SBP), the total advances of the banking sector surged to Rs.13.77 trillion by the month of October as compared to advances of processing months Rs.12.30 trillion reported by September 2024, showing a marked increase of 11% month-o-month. In September 2024, the banking sector advances grew by Rs.497 billion to Rs.12.30 trillion from advances value stood at Rs.11.80 trillion in August.
Banks maintained excessive liquidity due to the high deposits received from the customers. However, banks must lend or finance over Rs.1. 5 trillion to meet the ADR threshold of 50% and to avoid heavy penalties by end of December 2024.
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