KARACHI: The State Bank of Pakistan has acknowledged significant contribution of small and medium enterprises to the country’s GDP and stressed more steps to meet financing needs of the SME sector.

In its quarterly SME Finance Review issued on Tuesday, the SBP said it had been taking initiatives for promotion and development of SME banking as a result of which the banks’ outstanding SME financing (domestic) increased by almost 20 per cent to Rs287.8 as of Dec 31, 2014.

As compared to last year, almost 6pc growth in SME financing can be witnessed, said the report. The SME outstanding financing climbed to 6.3pc of total financing as compared to 5.5pc in the previous quarter.

The number of SME borrowers declined from 135,557 to 134,521 during the fourth quarter of 2014, while on a year-on-year basis; there was a decline of 6.7pc.

According to the report, non-performing loans (NPLs) declined by 3pc on a year-on-year basis, but rose 1.44pc when compared to the previous quarter. The SMEs sector’s NPLs stood at Rs87bn on Dec 31, 2014 as against Rs86bn on Sept 30, 2014.

The detail shows that the working capital financing constituted almost 74pc of outstanding SME financing followed by fixed investment and trade finance with shares of 13pc each. The facility wise distribution of borrowers depicted the tilt of banks towards working capital financing and trade finance to SME borrowers.

Sector-wise SME financing shows the shares of trading at 41pc, manufacturing at 42pc and services sector at 17pc in outstanding SME financing.

The small enterprises availed 59pc of the total financing to the SME sector primarily because of the large number of lower-end SMEs availing financing facilities from banks and DFIs.

Loan size-wise review shows that around 86pc SME borrowers used loans up to Rs3m and their share in total SME financing was 23pc, out of which, a major number of SME borrowers availed loans of up to Rs0.5m. Advances from Rs3m and up to Rs20m had share of 39pc in total financing while advances over Rs50m had a share of 15pc in total financing.

The SME financing by Islamic banks and Islamic banking divisions (collectively called IBIs) increased by 7pc in the quarter under review whereas share of IBIs decreased by almost 6pc when compared to same quarter of previous year. The share of SME financing of Islamic banking divisions (IBDs) is more than the share of Islamic banks.

Published in Dawn, April 29th, 2015

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