June 19, 2003	Thursday	Rabi-us-Sani 18, 1424

KARACHI, June 18: The Union of Small and Medium Enterprises (Unisame) has expressed its gratitude to the State Bank for drafting prudential regulation for SMEs.

In a statement the convener of the Unisame, Zulfikar Thaver, said, “the banks will now get involved in financing SMEs and work in close association with these entities who in the past never received any official patronage.”

He further said that with close working relationship between banks and the SMEs there would be continuous assistance and guidance from the former on the basis of asset conversion cycle and future cash flows, which was necessary for the growth of any business and industrial activity.

The union also hailed the regulation whereby all the facilities extended to the SMEs would be backed by the personal guarantees of the owners, and secondly banks are allowed to take clean exposure up to one million rupees.

The SBP has done excellent job by not only defining the SME and broadening its scope but also allowing access to banking channels for financial assistance on such a magnitude that it would help jump start a large network of SMEs across the country.

The facility of allowing banking loan up to Rs50 million to an entity (company), falling under SME definition against collateral would help in the growth of medium sized enterprises. Similarly, restricting the limit up to Rs150 million for all types of loans including leasing to an SME would assist banks to avoid bad loans.

Zulfikar Thaver said by widening the scope of SME the SBP had opened up new avenues for industrial and business activities, which would groom new breed of entrepreneurs.

By fixing the number of workers in an SME up to 250 persons for manufacturing concern and up to 50 persons for trading and service concern the SBP has widened the scope of SMEs, he said.

Similarly, the financial definition of the SBP has also given a lot of encouragement to the SMEs that would immensely benefit from it particularly, when the assets (excluding land and buildings) for trade and service concerns have been fixed up to Rs30 million and for manufacturing concern up to Rs 50 million.

Thaver said the condition of annual sales up to Rs300 million was also highly encouraging as this will bring in its fold a very large number of concerns who would qualify under SME definition.