PRs for SME financing amended: Five-year-old small, medium enterprises to be considered startups: SBP

KARACHI: The State Bank of Pakistan (SBP) has amended the Prudential Regulations for SME financing and now a small enterprise and medium enterprise up to 5 years old will be considered as startup.

In order to align the definitions of small enterprise and medium enterprise with the SME definition prescribed in SME Policy 2021, notified by the government of Pakistan, the SBP has amended the definition related regulations.

As per the Regulation SE R-1 for Definition of Small Enterprise, any entity having annual sales turnover of up to Rs 150 million will be considered Small Enterprise (SE) and a small enterprise up to 5 years old will be considered as start-up SE.

In addition, as per amended Regulation ME R-1 for Definition of Medium Enterprise, with annual sales turnover above Rs 150 million to Rs 800 million will be Medium Enterprise (ME). Accordingly, a medium enterprise up to 5 years old will be considered as start-up ME.

According to the SBP, these amendments are applicable with immediate effect on new financing. However, since the banks and DFIs need to segregate their existing portfolio according to the revised definition of Small Enterprise and Medium Enterprise, they are allowed an implementation period up to June 30, 2022.

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Moreover, SBP, incorporating these amendments, has also issued updated Prudential Regulations for SME financing.

The SBP has advised the Banks and DFIs to ensure circulation of these regulations among all their offices and branches for meticulous compliance in letter and spirit. Non-compliance of Prudential Regulations will lead to punitive action under the relevant provisions of BCO, 1962, the SBP warned.

The State Bank is making efforts to support the SME sector by providing financing facilities on a priority basis. SBP had already asked banks & DFIs to prepare a comprehensive SME Specific Credit Policy duly approved by their Board of Directors. The Credit Policy must give special mention to Small Enterprises (SE) financing keeping in view their specific characteristics and business conditions.

The SME sector contributes significantly towards national GDP, employment generation and export earnings. SBP believed that the impact of financial inclusion of SMEs has important implications for economic growth, competitiveness, and job creation.

Copyright Business Recorder, 2022