Unisame against privatization, merger of SME Bank

July 29, 2015 Off By Web Desk

Karachi: The Union of Small and Medium Enterprises (UNISAME) has urged the federal finance minister Ishaq Dar not to privatize or merge the SME Bank with any other bank as it is the only SME specific bank and the sector expects the government to invigorate it to serve the micro and small to medium sized entrepreneurs specifically all over the country.

President UNISAME Zulfikar Thaver said the SME Bank Ltd. is a Government of Pakistan owned entity and is a commercial scheduled bank. It is a specialized bank created to exclusively cater for the financing and other banking needs of the SME sector of Pakistan. The main purpose of this bank is to help the Small size enterprises (businesses) to graduate to Medium size and help the Medium size enterprises to get graduated to Larger size enterprises.

In Pakistan, less than 200,000 SME’s (7% of SME’s) currently borrow from banksand only 36% of the SMEs maintain bank accounts. If given a little support from the sponsors, this bank has the expertise, will and capability to increase its number of branches to provide the banking and financing services to the SMEs which are presently neglected by other banks. In other words SME Bank Ltd can be a one stop shop for all the banking and financing needs of the SME sector under one roof.

He said to achieve the 2025 vision and put the country on the path of prosperity, the word SME may be a buzz word between the Government planners circle but not in the commercial banking circles. To them it’s the profit’s that counts, which does not come from engaging with SMEs but it mainly comes from consumer financing such as credit cards, personal loans, individual car loans etc where they can charge the maximum interest or in Corporate/Higher Medium size loans which are less risky.

He said the point I am trying to raise is that we do not have to reinvent the wheel by creating another bank or push the reluctant private sector banks to finance the SMEs but we do have a specialized bank exclusively for SME sector and is also owned by the Government. In most of the countries in ASIA like India, Japan, Malaysia, Thailand etc. the SME lending banks are under their governments.

He added that the SME Bank Ltd has the potential to elevate Pakistan’s position from a lower middle income to upper middle income country as 99% of enterprises in Pakistan are SME’s but the bank was put on the list of privatization from the day of its inception. Due to the reason that it is on privatization list the required equity was never injected in this bank and instead of increasing its network, the number of branches reduced from 100 to just 13. Despite all the hurdles the bank is financing the SMEs in all the four provinces of Pakistan and made profits in 2nd Quarter of 2015 but not to its potential.

To help SME bank to actually contribute to achieve 2025 vision, all the Government needs do is to remove the name of the bank from the list of privatization and inject the required equity into it as the bank already have the capability to expand to deliver to SME sector for which it was created.

Thaver said another reason that all Banks in Pakistan are shy to lend to SME’s in Pakistan is our Banking Courts system as it take almost four years for a defaulted loan case to get decreed from the banking courts. If any borrower wants to get a holiday from payment of instalment to the banks then they just go to the banking court against the bank and for at least four years they do not have to pay any instalments.

The solution to this problem is to hire more Banking Court Judges as they are already very burdened with number of cases that they hear per day and secondly implement the existing law that all banking cases may be decreed within six months.

UNISAME experts are also of the opinion that the SME Bank needs to be strengthened and along with the Exim Bank which is on the anvil, the economy will get a tremendous boost which is the need of the hour to enable the economy to meet global challenges.