KARACHI, April 5: The Union of Small & Medium Enterprises (Unisame) has urged the State Bank of Pakistan (SBP) to arrange finance for the purchase of property by the small and medium enterprises (SMEs).

Presently majority of SMEs belonging to different sectors, including workshops and cottage industry, are established in rented premises which constitutes up to 12 per cent per annum of the total cost.

Above all the rented premises keep the SMEs in a state of uncertainty owing to often repeated demand from the landlord for upward revision in rent. Such a situation is not only damaging for any business concern but in case of change in address it ends up in closure.

A spokesman for Unisame told Dawn that the State Bank and commercial banks, including the SME Bank have been asked to provide finance to SMEs to enable them to purchase property suitable for their operation and mortgage the same with the bank.

It was also proposed that the bank could purchase property on account of the SME and lease it to the entrepreneur who can pay instalments ranging from five to 10 years and at the end of the lease period the entrepreneur would become its owner.

This system would enable the SME to inculcate compulsory and progressive saving which would not be more than the rents paid for industrial and commercial properties which range between 12 to 15 per cent of the value of the property. As a result of this the SME will ultimately become owner of the premises and as the time passes his investment in the property will keep accumulating.

The leasing companies give finance for plants, machinery as well as vehicles which are subjected to depreciation, whereas property and land which are immovable assets are not much exposed to depreciation and have the potential of recording higher value.

It has been argued that in the past banks did not venture in land and property for commercial and industrial setups as there were shortage of funds but now the situation has changed and there is a lot of liquidity in the banking sector.

Leasing experts, senior bankers, as well as leading business leaders did not find any flaw in the scheme and were of a view that this would assist SMEs to work more aggressively and also become competent in their respective fields.