The State Bank of Pakistan (SBP) has decided to develop a roadmap for the promotion of Small and Medium Enterprises (SMEs) banking in Pakistan for higher GDP growth. Sources told Business Recorder Friday that recently a consultative workshop was organized by the SBP Banking Services Corporation (SBP BSC) in Lahore to discuss the issues being faced by SME sector and initiate the process for the proposed roadmap.
The SME sector contributes significantly in economic and social development, especially through employment generation and poverty alleviation. According to SBP, in Pakistan, SME sector contributes 30 percent towards the country''s GDP, employs more than 80 percent of the non-agricultural workforce, accounts for 35 percent of the value added in the manufacturing industry and generates 25 percent in export earnings.
However, financial sector penetration generally remains low for SMEs as banks are hesitance to lend to SMEs. A number of factors contribute to this reluctance, including a high-risk perception, high transaction and administrative cost, corporate mindset, heavy investment in government papers and unavailability of assessment of demand of financing.
There are some demand side issues which limited the SMEs ability to access financial services from formal banking channels. The demand side issues include low-level of financial literacy, high transaction cost and lack of proper accounts management, complicated loan procedure, reluctant to tax filing and lack of collateral and documentation by SMEs.
Therefore, in order to promote SME financing in the country for higher GDP growth, SBP along with all other stakeholders is working to develop a market based inclusive financial system to meet the financial needs of SME. A long term roadmap is also under preparation with coordination of all stakeholders to promote the SME financing in the country.
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