Govt approves SME policy to provide loan up to Rs10m without guarantee: Khusro

ISLAMABAD - Federal Minister for Industries and Production Khusro Bakhtiar on Wednesday said that the government has approved a comprehensive Small and Medium Enterprises (SME) policy that would provide loan up to Rs10 million without any guarantee to start the businesses besides proving other facilities.
In a joint press conference along with Federal Minister for Information and Broadcasting Fawad Hussain, Federal Minister for Industries and Production has shared the details of SME policy, which was approved by Federal Cabinet on Tuesday. He informed that SME policy would allow small businesses to borrow up to Rs10 million under the Assan Finance Schemes without pledging their assets as collateral. The collateral free lending scheme will benefit about 30,000 SMEs that will provide loans up to Rs10 million with lowered interest rates of 9 percent. Venture Capital regulations will be reviewed to support growth of this sector for providing equity finance to start-up SMEs including those in the IT & ITEs sector.
Under the policy, the requirement of No Objection Certificate (NoC) for the establishment or expansion of certain industries has been done away with. Khusro Bakhtiar said that there would be no need of NoC for start-ups and expansion for low risk businesses including services sector, wholesale transport. However, there would be time bound approval/NoC issuance (maximum 30 days) for medium/high risk SMEs like light engineering, leather, auto-parts, sports goods and cutlery. However, SMEs working in explosive, fire, boiler and chemicals have been put on high risk category. Federal Minister for Industries and Production said that tax liability has reduced by 60 percent to 83 percent for manufacturing sector SMEs of annual revenues of up to Rs250 million. The government has simplified the tax return form to one page. Currently, the tax reduction is available to manufacturing sector SMEs to be extended to IT & ITEs and selected service sector in near future.
Bakhtiar said that the turnover tax rate has been fixed at 1.25 percent but the tax rate for annual turnover below Rs100 million will be 0.25 percent. He said that 0.5 percent fixed tax would be applicable on the annual turnover of Rs100 million to Rs250 million. There is a separate option for income tax and 7.5 percent income tax would be applicable on turnover of Rs100 million, the minister said.
Under the policy, the government has allocated 4,200 acres (19,500) plots for SMEs in the industrial estates on easy installments. Plug and play infrastructure will be developed to provide utilities-ready infrastructure. Meanwhile, regulations are being revised to allow greater SME participation in the public sector procurement of goods and services. Trade Development of Pakistan (TDAP) will provide increased SME participation in international trade fairs and exhibitions. Women entrepreneurs will be supported as special focus areas including support for greater access to finance, awareness and training and advisory services to meet tax and regulatory compliance requirements. Women will get a 25 percent tax exemption for small businesses, the minister said. An SME Registration Portal is launched that will provide one-point access to all SME incentives and an SME fund will be established with a total contribution of Rs30 billion, over a period of time for public sector investment in the SME sector.
Federal minister said that the government and commercial banks would bear the losses by 40 to 60 percent in case the businesses fail. The government had already allocated Rs23.5 billion for the purpose. He said there were several other schemes the government would introduce to promote SME sector.
SMEs are the back bone of the economy as there are a total of 5.2 millions SMEs in Pakistan, representing over 99 percent of the total business in Pakistan, employ over 78 percent of the non-agriculture labour force and contribute 40 percent to GDP and 25 percent to exports. An SME led economic growth is inclusive, sustainable and addresses the structural issues in the Pakistan’s economy by widening production and exports base and increasing the pace of new enterprise creation.
Speaking on the occasion, Federal Minister for Information and Broadcasting Fawad Hussain highlighted the importance of developing strong industrial foundation to promote growth and cater to the needs of 220 million population. He said unless the industrial sector of the country was promoted, it would be hard to come out of economic problems. He said the SME policy has been prepared in consultations with the stakeholders.

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