SBP's Initiatives for SMEs Financing

SBP’s Initiatives for SMEs
Issuance of a separate Prudential Regulation (PRs) for
SME financing.
Help in capacity building in human resource
development of banks/DFIs in the field of SME lending.
Creation of a separate SME Department in State Bank.
Enlarging the scope of Credit Information Bureau (CIB).
Granting commercial banking license to SME Bank.
Focus on SME lending in SBP Lending Schemes for
Defining SMEs
In Pakistan, definition of SME varies from institution to
PRs define SME as an entity which fulfills all the following
Total Assets at cost up to
Rs.50 M
Rs.100 M
Rs. 50 M
Total Sales Turnover up to
Rs.300 M
Rs.300 M
Rs. 300 M
No. of Employees up to
Encouraging Cash Flow
Based Lending
Banks/DFIs are encouraged to lend to
SMEs on the basis of asset
conversion cycle/cash flow basis.
– Banks / DFIs are allowed to take clean
exposure i.e., facilities secured solely
against personal guarantees on an SME up
to Rs. 3 million provided that funded
exposure should not exceed Rs. 2 million.
Exposure Limits
• Per SME limit Per Bank: Rs. 75 M
• Per SME limit From All Banks: Rs.150 M
– For other than leased assets: Up to Rs. 100.0 M
– For Clean exposure:
Up to Rs. 3.0 M
• It is expected that SMEs approaching this limit
should have achieved certain sophistication as they
migrate into larger firms and should be able to meet
the requirements of Prudential Regulations for
Corporate / Commercial Banking
Capacity Building of Banks for
SME Lending:
Hiring of a Consulting Firm
• SBP has hired a foreign consulting firm, which will
provide capacity building support to a few
commercial banks, including SME Bank, on cost
sharing basis.
• The above will cover full spectrum of establishing an
SME business line ranging from preparation of
participating banks’ business plans to training of
loan officers.
• The IBP and NIBAF will also collaborate with the firm
in providing training on SME credit to bankers.
Establishment of SME
Department at SBP
To help create conducive macro-prudential environment for
banks/DFIs thereby increasing the flow of credit to SMEs;
To promote strategic focus on SMEs on the part of the
To facilitate banks/DFIs in adopting best practices for the
development of their SME business lines through provision of
capacity building and training services;
To induce banks/DFIs for up-front investment in people and
To coordinate with other SME stakeholders for matters relating to
SME financing.
Enlarging the Scope of Credit
Information Bureau (CIB)
• SBP is in the process of further lowering
the CIB limit from Rs 500,000 to cover all
loans by the end of June 2005. This will
help in improving the financial institutions’
ability to provide loans especially to
individuals and SMEs.
Issuance of Commercial
Banking License to SME Bank
• The SME Bank, which was established through
a merger of Small Business Finance
Cooperation and Regional Development
Finance Cooperation, has been issued a
commercial banking license by SBP enabling the
bank to undertake the whole range of banking
• SME bank will also receive capacity building
services through the international consulting firm
hired by SBP.
SBP Credit Schemes
• The State Bank in its different credit schemes
namely: 1) Long Term Financing of Export
Oriented Projects (LTF-EOP); 2) Locally
Manufactured Machinery (LMM); and 3) Export
Finance Scheme (EFS) has been paying special
attention to the financing needs of SME Sector.
• The banks/DFIs are advised to focus SME
sector while allowing credit under these
Flow of Credit to SMEs
• Share of SMEs in total bank credit:
(Rs. in billion)
• 67% increase since 2002.
Thank You