SME Bank Limited will be privatised by December 2006, and the State Bank of Pakistan (SBP) would decide the modality of its privatisation - either through stock market or through Privatisation Commission.
This was stated on Wednesday by SME Bank President Mansur Khan at the inauguration ceremony of the bank's second branch here.
Ahsan Nasim, Chairman, Board of Directors of SME Bank Limited, and Stefan Martiniak, Head of SME Finance of the bank and Senior Advisor in Bankakademie International, and other representatives of the bank were also present on the occasion.
The bank also launched 'Express Loan', a SME-specific product to be delivered from its branches in Lahore and Karachi. Through this facility, loans from Rs 50,000 to Rs 250,000 to small businesses, without collateral of immovable assets, would be issued. It is targeted towards small businesses that are at least two years old and, as the facility was primarily cash-flow based, the borrower has to give evidence that the business could support repayments in 9 to 12 months. Earlier the only tangible security requirement was of movable business or personal assets.
Mansur said that this loan product was being introduced under the advice of Bankakademie International, a German consulting firm engaged by the State Bank of Pakistan (SBP) for development of SMEs-related banking reforms under Asian Development Bank (ADB) supported SME Sector Development Programme. "Since June, 2005 the SME Bank has a team from Bankakademie International advising it on its restructuring programme with a view to prepare it for privatisation by the end of 2006," he added.
According to the bank President, a detailed market survey of SMEs in cities with large SME clusters had been made to determine the exact requirements of SMEs, to prepare banking products that would meet such needs as well as offer the lending banks the security or comfort they sought.
The SME Bank has started opening commercial bank branches in line with a restructuring plan initiated in 2004. The bank has consolidated its position after the amalgamation of SBFC and RDFC in 2002 by carrying out a substantial house-cleaning exercise.
SME Bank, which started its commercial banking operations from Islamabad, Karachi and Lahore earlier this year in May, has extended it to Peshawar, Gujranwala and Faisalabad, and expects to soon offer commercial banking services to its clients in Sialkot and Quetta. It is also in the process of opening additional branches in Karachi and Lahore.
Ahsan Nasim said that the bank was being privatised with the aim of improving its balance sheet.
He said that formulation for sanctioning of loans had been improved to international standard, so that bad loans could be avoided. He said he was of the firm view that the country's economy was in good shape, while revenue collection had improved. Stefan Martiniak highlighted the findings of a study on SMEs, conducted by Bankakademie International.
While talking to newsmen, Mansur Khan said that the bank was targeting three sectors for SMEs loaning ie services, trading and manufacturing. "We have asked Lahore University of Management Sciences (Lums) to conduct a complete survey of these sectors, and on that data a strategy would be devised for loaning."
The result of the survey was expected in one week, he added. He said that repayment of loan period of 12-month could be relaxed up to 18 months, while the bank was charging 10.5 percent mark-up on loans. He said that the bank had managed to return Rs 13 billion to SBP which the bank owed, and the remaining outstanding amount of Rs 2.5 billion would be repaid by the end of this year. "Right now, the bank is operating eight branches in eight cities," he said.
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