KARACHI - The UNISAME has urged the Insurance Association of Pakistan (IAoP) to develop a product for the small and medium sized entrepreneurs which would make the commercial banks comfortable in financing sectors like agriculture, trading, services and manufacturing.
He said some insurance companies are issuing policies to banks for financing the farmers and indemnifying the commercial banks against crop failure and this has encouraged the farmers to increase cultivation due to financing from banks which is cheaper than obtaining finance from private money lenders who charge very high rate from the SME farmers. In case of crop failure or loss due to floods, monsoons the insurance company pays the borrowed amount directly to the banks.
The insurance companies cover the risk by re-insuring with international re-insurers and keep only a nominal amount of premium for themselves.
He said banking, insurance, leasing and logistics facilities are the major requirements of the SMEs and the government needs to facilitate the entrepreneurs by financing them and making the commercial banks comfortable in financing the SMEs.
Leasing will make repayment easy as under lease agreement the SMEs can repay in installments under pay as you earn schemes.