LAHORE:
Small and Medium Enterprises Development Authority (Smeda) Outreach Division
General Manager Muhammad Alamgir Chaudhry has said that with the patronage of
the State Bank of Pakistan, the SMEs are having better access to finance as
compared to negligible access available in the past.
Addressing
at the concluding session of the consultation process on credit guarantee
scheme plan for SMEs meeting held on Friday at the Smeda head office, he said,
the banking industry is still not comfortable to issue the adequate credits to
SMEs due to high risk, which can be covered by introducing a Credit Guarantee
Scheme commonly being practiced in plenty of the growing economies across
the world.
The
participants of the consultative meeting recommended submitting the plan as a
major budget proposal this year to establish a Credit Guarantee Fund with at
least $25 million.
Sheharyar
Tahir, head External Relations Department of Smeda and Imran Ahmad of the SBP
conducted the proceedings of the meeting.
The
meeting was widely attended by representatives of banks, development finance
institutions, private sector and the government’s business development
agencies.
Chaudhry
said that Smeda, taking cognizance of the need, had developed a comprehensive
feasibility study for the required scheme under the aegis of the Investment
Promotion Unit, jointly organised by the United Nations Development
Organization (UNIDO), Smeda and the government of Italy.
A
continued consultation process in collaboration with the State Bank was started
last year to have the feedback from the government of Pakistan, bankers, SMEs,
trade bodies and other relevant stakeholders, the concluding episode of which
has been arranged at the Smeda head office, he added.
The
presentations given by representatives of Smeda, State Bank of Pakistan and
FINCON revealed that the formal lending of SMES in Pakistan was much less than
the actual requirement.
According
to the feasibility study compiled by FINCON for UNID0-SMEDA-ITALIA Investment
Promotion Unit, the SMEs are being provided only six percent of the total
formal lending by financial institutions, whereas the share of SMEs’ lending in
neighbouring countries is around 30 percent of the total credits.
The
default risk in the SME-based economies of the world has been covered by the
credit guarantee schemes and there are more than 2,250 credit guarantee schemes
in 100 countries of the world, he said.
Therefore,
the feasibility has offered a complete mechanism for creating a full-fledged
credit guarantee scheme for SMEs in Pakistan, proposing major chunk of funds
from international donor agencies, such as the World Bank, USAID, DFID and
Italian Development Cooperation.
As per
the feasibility, the credit guarantee scheme fund should be up to $25 million
and the investment in fund is expected to generate approximately 0.5 million
direct jobs; followed by a GDP of Rs250 billion and an additional tax revenue
up to Rs33 billion over 10 years.
The
government of Pakistan may be asked to share 20 percent of the total required
fund or to match the equal
amount of fund to be generated through donor agencies and the same would be managed
by setting up a credit guarantee fund company, which will
work as a public limited company.
amount of fund to be generated through donor agencies and the same would be managed
by setting up a credit guarantee fund company, which will
work as a public limited company.
Earlier,
stakeholders meetings held in Karachi, Peshawar and Islamabad have also
unanimously recommended taking up the feasibility of CGS with the government of
Pakistan.
Therefore,
Smeda, as per the recommendation of the concluding consultative session would
submit the detailed feasibility as the major proposal for the forthcoming
Federal Budget 2017/18.
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