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The small and medium enterprises (SMEs) sector is apprehensive about privatisation of the SME Bank Limited which is likely to be completed in the next month.
The SME sources told Business Recorder that the SME Bank Limited is on top of the privatisation list for which federal cabinet has already accorded its approval.
Sources said the government would not be able to generate much revenue from its privatisation and could only save a loss up to Rs 600 million.
Instead of privatising the small institutions, the government should give priority to the privatization of Pakistan Steel Mills like public sector entities which are causing up to Rs 10 billion loss annually to the national exchequer.
The SME sector wants the government to disallow any change in the name and basic role of the SME Bank to support the small and medium enterprises by extending concessional loans following its privatization. The bank was established to exclusively to cater the needs of SME sector besides addressing the needs of this niche market with specialized financial products and services for the development of SMEs.
The government as part of its restructuring program in 2002, amalgamated the Regional Development Finance Corporation (RDFC) and small Business Finance Corporation (SBFC) with SME Bank Ltd assigning a specific role for the growth of small and medium enterprises.
The sources said that since there is a restriction on issuance of license for new banks therefore, the scarcity factor adds much value to the SME Bank's license that could attract potential buyers in the privatization process.
The government had developed a consortium of banks for establishment of Khsuhali Bank Limited to promote micro financing in the country and handed it over to the private management that made it successful. The success story of micro finance bank encouraged the private sector to open new banks to support micro financing in the country. Instead of privatizing the SME Bank, the government which is major stakeholder of the SME Bank should have replicated the Khushali Bank's model, the sources added.
Commenting on the privatization of the SME Bank, Convener Standing Committee of the Lahore Chamber of Commerce and Industry on SMEs and Member Steering Committee of the Ministry of Industry Rehmat Ullah Javed said that the SME sector is an important segment of the economy and privatization of SME Bank would be a dilemma for this sector. He claimed that the bank could not show progress mainly because of the unfavourable prudential regulation of the central bank.
The government instead of disinvesting in the SME Bank should have improved the prudential regulations to promote SMEs in the country. He also lamented that the government did not take the relevant trade bodies into confidence before taking this decision.
He demanded of the government to publicize the terms and conditions on which the bank is being privatized besides ensuring that basic role to support the SMEs remains intact in future.

Copyright Business Recorder, 2020

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