Banks need to ensure lending to priority sectors’ SMEs to stimulate growth: FRIA

SBP urged to allocate at least 25 percent of concessional financing, including Export Finance Scheme, exclusively to SMEs in export sector

LAHORE   -  Senior Vice Chairman Fero­zepur Road Industrial Asso­ciation (FRIA), Shahbaz Aslam has asked the banks for lend­ing to priority manufacturing sectors of SMEs to stimulate economic growth and devel­opment in the country.

In a statement issued on Saturday, he said that we need to set our primary agenda to strategize and enhance financ­ing and lending to priority sectors to stimulate economic growth and development in Pakistan. Shahbaz Aslam pointed out the government’s ongoing efforts to promote economic stability, fiscal disci­pline, and sustainable growth.

He emphasized the critical role of the banking sector in supporting the government’s development agenda and urged the banks to increase financing and lending to prior­ity sectors, namely agriculture and Small and Medium-sized Enterprises (SMEs).

The SVC FRIA requested the Pakistan banks to lead a task force comprising representa­tives from the banking sec­tor, government, and relevant stakeholders, with the pri­mary objective to accelerate fi­nancing in the priority sectors and devise actionable strate­gies to overcome the existing challenges and bottlenecks hindering the growth of these vital sectors. He reiterated the FRIA’s commitment to work­ing closely with the banking sector to address the financ­ing needs of priority sectors and ensure the effective im­plementation of the proposed strategies and initiatives.

Shahbaz Aslam highlighted the SBP’s role in providing regulatory support, policy guidance and financial incen­tives to encourage banks to ex­pand their financing activities in alignment with the govern­ment’s priorities.

He said that despite the sig­nificant importance, over 5 million SMEs have been fac­ing a huge credit gap, receiv­ing only 7 percent of private sector credit, far below than neighboring countries like Bangladesh (25 percent) and India (18 percent), with the State Bank committing to in­crease SME credit share to 17 percent by 2023. To achieve this, we must advocate for targeted and fixed SME alloca­tions in concessional financing schemes, particularly those aimed at the export-oriented sector. He proposed the SBP to allocate at least 25 percent of concessional financing, in­cluding the Export Finance Scheme, exclusively to SMEs in the export sector. This stra­tegic allocation will not only boost SME sector’s growth but also promote a more inclusive and resilient economy.

The SVC FRIA suggested the central bank to review its credit policies by fixing a spe­cial quota to finance the small and medium enterprises, as only the large industries have been availing government’s all major concessional export loaning facilities, with very limited financing is left for the SMEs which are the backbone of the economy, contributing around 40 percent to the na­tional gross domestic product (GDP). He said that the State Bank of Pakistan has launched various policies for the promo­tion of SME finance, but the re­quired results were still await­ed. It was unfortunate that banks were always reluctant to provide financing to SMEs as their financing continued to show negative growth.

Shahbaz Aslam said that the government with a view to help grow the businesses will have to take solid measures to strengthen the industry, especially the SMEs, saving the livelihood of millions of workers associated with the small industries. The govern­ment will have to make a vis­ible reduction in markup rate to help grow the businesses, particularly the SME sector, as Pakistan needs millions of jobs annually. We need to highlight the critical role of Small and Medium Enterpris­es (SMEs) in driving sustain­able economic development in Pakistan. With an estimated 5.2 million businesses, the SME sector is a cornerstone of our economy, fostering em­ployment, growth, and export diversification, he added.

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