State Bank of Pakistan Governor, Dr Ishrat Husain has presented a roadmap to the commercial banks for the development of small and medium enterprises (SMEs). The SBP governor elaborated on the vision of SMEs and the ways to attain that vision while addressing the concluding session of two-day conference on ''SME Financing-Issues and Strategies'' here on Wednesday, organised by the SBP. SBP Deputy Governor Tawfiq A. Husain, presidents and senior officials of commercial banks and foreign delegates were also present on the occasion. Dr Ishrat said that without a vision and direction we would be walking on a wrong path, and we have to be clear on what has to be done in the next few years.
HE OUTLINED A FOUR-POINT VISION FOR THE SME SECTOR: to bring informal enterprises into formal sector; to bring sole SME ownership, proprietorship and partnership to private limited companies; to integrate SMEs with large corporate sector through sub-contract relationship; and convert SMEs, not all of them, into large companies.
The SBP governor was of the view that financing of SMEs was not the only component, although very critical, which could lead to multi-realisation of the vision. Technical and institutional support mechanism to SMEs through Smeda, provincial and local governments and local organisations could also compliment the bank financing of SMEs, otherwise financing of SMEs without technical know-how, infrastructure facilities and technological absorption would go down the drain, he added. It was imperative for the banks to ''contact'' themselves with these elements.
In this connection the banks should induct relationship managers having knowledge of industrial activities. In fact, the relationship managers should be well versed with economic activities and industries of their concerned areas. Moreover, expertise would not only help them in understanding industry parameters, but also marketing and monitoring, Dr Ishrat said.
He advised the bankers to develop one or two products for SME financing in consultation with Smeda, associations and Export Promotion Bureau (EPB). The SBP governor said that EPB have conducted many studies on developmental products of export nature, including marble and granite, gems and jewellery, fishery, pharmaceutical products, livestock, horticulture and engineering, and were waiting co-ordination among finance, production and exports.
"The banks could work on these identified fields for preparation of their banking product. So much market research has been carried out for the last many years that there was no need to conduct more, thus we should make use of the existing studies," he added.
Dr Ishrat suggested that young male and female relationship managers from local areas should be recruited and only trained for SME financing while keeping them away from the conventional banking. "It would be beneficial if relationship managers were inducted from their areas on merit, as they would have better knowledge of economic activities and markets of their areas, while the recruitment would also be contributing in checking the unemployment problem," he added.
Dr Ishrat pointed out that many SMEs in various parts of the country, holding strong religious beliefs, were reluctant to opt for banking facilities, thus it would be more appropriate if commercial banks introduced SME products under the Islamic mode of banking.
He also suggested that the banks should also focus on SMEs in small cities and places, rather than just focusing on big cities. Failing to do so, a large segment of SME would be ignored, which, otherwise, could earn huge business for the banks, he maintained.
The SBP governor said the banks should publish and print their documents in Urdu and regional languages while the documents must be standardised. "Thus it was imperative to break the cultural barrier, as not all SME owners converse in English."
He was of the view that successful SMEs should be documented and taught as case studies in educational institutions, so that young entrepreneurs could drive inspiration. Dr Ishrat stressed the banks to approach SMEs with a different mindset; the era of ''Thanedar banking'' was over. He said that by ignoring the SMEs, the commercial banks would be missing a large business.
Comments
Comments are closed.