KARACHI, Feb 9: President, Small and Medium Enterprise (SME) Bank, Kaiser H. Naseem, has said the bank is in the process of developing Islamic instruments and hopefully it will start functioning after July next.

He was responding to a query from a businessman at the meeting of Karachi Chamber of Commerce and Industry (KCCI) on Saturday.

Under a Supreme Court verdict, Pakistan is bound to transform its financial system into the one conforming to the Islamic law before July this year, he said.

On financing, he said that the bank would not provide any loan to the SME unless their targets were aimed at diversifying country’s economic development and value addition in exports.

He agreed that SMEs are facing problems as the procedure of various banks for giving loans are cumbersome. He added that procedures have been designed to simplify the application form and loans can now be obtained in a minimum three months time instead of one year. “We are trying to curtail the days to 15,” he said.

Kaiser said the loan applicant would now get the answer in “Yes or No” in just seven days time.

He said he was also in touch with the State Bank to promulgate the prudential regulations of the SME Bank and it would be different from other banks.

The SME Bank chief said that 80-85 per cent of SMEs in Pakistan face problems after borrowing money from various sources as to where they inject money in lucrative business avenues.

These SMEs, he said, also complain of non-conducive environment due to lack of regulatory frameworks, tax rules and number of agencies which now have been curtailed to 40 from 80- 90. As a result of this, they have to hold back their expansion plans. These SMEs also lack marketing abilities for their products abroad.

“There is a need to change the business environment now,” Kaiser said, adding that the work is going to overcome business related hurdles.

He said the SME Bank had recovered around Rs4 to 5 billion out of the outstanding amount of Rs15 billion from the defaulters of SBFC and RDFC out of which 80 per cent lending had been given in Punjab. Around 400 persons out of 1,500 in the SBFC and RDFC have been sent home under the golden handshake scheme.

At present the SME Bank is providing loans from the amount recovered from the defaulters. “We have now liquidity and will continue to augment our recovery drive in order to provide more finance for the SMEs,” he added.

Earlier, President, KCCI, A. Q. Khalil, urged the SME Bank chief to conduct a survey of SMEs to find out their actual strength and the magnitude of their problems.