KARACHI - The Union of Small and Medium Enterprises (UNISAME) has invited the attention of Federal Finance Minister Dr Hafeez Shaikh SME sector’s issue of access to finance, urging him to ensure that the finance is practically available to the SMEs at affordable mark-up on the basis of positive cash flows of the enterprises as permitted in the prudential regulations.
According to the statement, President UNISAME Zulfikar Thaver said the SME retailers, wholesalers, distributors, importers, exporters, manufacturers, agriculturists and service providers all need finance and the banks insist on collateral in the shape of immovable properties and that too of selected urban areas only and ignore the directives of financing on positive cash flow basis to the SME applicants.
The SMEs need bridge finance for transactions relating to import and export and distribution till such time the proceeds are realized. Secondly they need finance for purchase of machinery, plant and equipment for balancing, modernization and replacement (BMR) and thirdly they need project finance for setting up industries.
He said although the State Bank of Pakistan (SBP) has announced several schemes for financing SMEs the banks are reluctant as the SBP provides the finance but the risk in the financing is that of the banks and the banks lack risk management abilities. Their risk management officers are not trained in risk management of the SME sector.
Thaver said that in several meetings with the SBP he has invited the attention of the SBP officials to the state of affairs and urged SBP officials to come up with “Pay As You Earn” schemes whereby the banks can finance the SMEs to buy shops, warehouses, factories, raw material, income generation vehicles, generators, machinery and repay as they earn and simultaneously pledge or mortgage the property purchased to keep the banks covered in terms of their demand for collateral.
He also urged the SBP to finance housing as it would support 32 different industries as construction involves the purchase of several items like cement, paints, wood crafts, iron and steel items, tiles, door locks, electrical goods, electronic goods and other miscellaneous items.
Sajid Naqvi, secretary general UNISAME, demanded leasing facilities for SME financing and urged the SBP to include leasing in its agenda as leasing comes under the Security Exchange Companies of Pakistan (SECP) technically but most of the leasing companies borrow from the banks and carry on their activities and this becomes expensive for the SMEs and it would be affordable if the leasing facilities are provided by the banks themselves to SMEs directly.
He said under the leasing contract the need for collateral is well served by the subject property which is purchased for the SME by the bank and remains in the name of the bank till such time the value is fully paid.