Infrastructure, Housing & SME Finance
State Bank of Pakistan
SME Sector in Pakistan
SMEs are engine of growth, employment, and income
distribution leading to poverty alleviation.
SMEs are nurseries of entrepreneurship and innovation
SME sector contribution is around 30% towards GDP , employs more than 70% of non-agricultural workforce and contribute
25% to export earnings of Pakistan.
99% of total 3.2 million economic establishments in Pakistan are SMEs.
Credit to SMEs – Trends & Current position
Rs. in Billions
Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10
SME NPLs 30.1
• SME Finance portfolio forms about 10% of total banking sector advances which is proportionately lower keeping in view the huge potential of SME sector. • There has been decrease in SME Finance in the last 2 years due to economic & financial crises, power outages, deteriorating law & order situation in the country.
Current SME Finance Portfolio
Region Wise Distribution of SME Finance
Some major Issues in SME Finance
Demand Side Issues & Constraints
Absence of Proper Accounts Management, Business Planning, Missing
Lack of Collaterals to Meet Banks’ Requirements
Low level of Awareness about Different Financing Options Absence of Reliable and Credit Worthy data
Supply Side Issues & Constraints
Shortage of Credit Evaluation, Product Design, Marketing Skills and non- Innovative non-
Perceived to be High Risk Projects by Banks
Absence of SME R & D in Banks
SBP Initiatives for Promotion of SME
Provision of Enabling Regulatory Framework:
Review of current Regulatory Framework for SMEs
Formulation of Refinancing Schemes for SMEs.
Credit Guarantee Scheme for Small and Rural Enterprises
Cluster Development Surveys (with LUMS & IFC)
Capacity Development of Banks (Grass Root & with IFC)
SME Sector Development Project with Donor Agencies
Prudential Regulations for SMEs
Definition of SME:
250 for manufacturing/service concern
50 for trading concern
Max. Total Assets less Land & Building:
100 M for manufacturing concern
50 M for trading & service concern
Net Sales not Exceeding Rs. 300 M
An individual can also be treated as an SME
Prudential Regulations for SMEs ..Cont’d…
Source and Capacity, Cash Flow Backed Lending:
Personal Guarantees of Owners of SMEs
Clean Limit of Rs 3m (excluding clean consumer financing limits to
sponsors of SME)
Per Party Exposure Limit
Maximum Exposure from all FIs Rs 150 M.
Exposure of a Single Bank/DFI on SME 75M.
The limit has no relationship with equity of the borrower. borrower.
An SME, willing to comply PRs for Corporate/Commercial
Banking, may be allowed higher exposure limit.
Prudential Regulations for SMEs …Cont’d
Minimum Conditions for taking Exposure
CIB report for exposure exceeding Rs. 0.5M (defaulters may
be extended loan on genuine grounds)
Financial Accounts for exposure exceeding Rs. 10 M
Borrower Basic Fact Sheet (BBFS)
Proper utilization of loan
Restriction on facilities to related parties (Director, Major
Shareholders, Chief Executive and Employees of bank)
Classification and Provisioning