Loans disbursement: SMEDA launches credit risk assessment system for manufacturing SMEs

LAHORE: The Small and Medium Enterprises Development Authority (SMEDA) has launched an initiative to develop a separate credit risk assessment system for easy disbursement of loans to the manufacturing SMEs in Pakistan.

Farhan Aziz Khawaja, CEO SMEDA, in a press statement issued here on Monday, informed that the initiative had been started through a PSDP funded project of SMEDA; “the Research, Regulatory Insight & Advocacy Assistance for SMEs” (RRI&A) under the federal Ministry of Industries & Production (MoIP).

CEO SMEDA said that SMEs in Pakistan face significant hurdles in obtaining finance. Challenges encompass limited data transparency, complex paperwork, cumbersome bank protocols, SMEs’ creditability and readiness, high interest rates, and insufficient collateral, he added and informed that the core aim of SMEDA initiative is to establish a reliable Credit Risk Assessment Model that can enable financial institutions in accurately appraising the creditworthiness of Manufacturing SMEs by pinpointing predictive cues and information channels to enhance current credit risk evaluation processes and tools.

He hoped that emerging model will help establish a comprehensive framework guiding well-judged lending choices made by financial institutions. The initiative will provide a complete system for scrutinizing established credit risk assessment models, such as Credit Scoring and Credit Rating Models, to gauge the suitability of credits for Manufacturing SMEs.

In this regard global best practices would also be reviewed to provide the financial institutions with a robust toolset for evaluating Manufacturing SMEs’ credit risks and feeling comfortable to issue required loans, CEO SMEDA added.

He further elaborated that the new assessment system would be able to address the distinct characteristics of each category of manufacturing SMEs to enhance their positioning and perception among lending institutions.

The intended model shall select predictive indicators, taking into account factors such as business and credit risk, cash flow, industry benchmarks, and economic indicators, he said adding that through collaboration with regulators, banks, fintech companies, and credit bureaus, the Model would support well-informed lending decisions to amplify financial accessibility and growth of SMEs.

Through this initiative, SMEDA remains committed to SME development through evidence-based policies and innovative initiatives, advancing economic growth and SME prosperity in Pakistan, CEO SMEDA said.

It is notable that in this regard a Request for Proposal (RFP) has also been issued to the financial experts and Consulting Firms to develop comprehensive and innovative model, specifically tailored to address the unique challenges of Manufacturing SMEs.

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