From challenges to opportunities: The journey of persistence, resilience, and growth

The Small and Medium Enterprise (SME) sector in Pakistan plays a pivotal role in the national economy, contributing approximately 40% to GDP and providing employment to millions. Despite its significance, the sector faces numerous challenges that hinder its growth and development. Key barriers include limited access to finance, complex documentation requirements, low adoption of technology, and restricted market access. According to a World Bank report, only 7 percent of SMEs in Pakistan have access to formal financing, which severely limits their potential to grow. Traditional banking systems have often fallen short of addressing the specific needs of SMEs, relying heavily on high collateral requirements and offering limited tailored financial products. These obstacles, coupled with cumbersome processes, leave many SMEs unable to modernize, scale, or compete effectively, forcing them to operate in isolation and under significant constraints.

Revitalizing Pakistan’s SME market: BoP’s transformative role

To combat this persistent challenge, the Bank of Punjab (BOP) has embarked upon a transformative journey, reshaping the financing landscape for SMEs in Pakistan. In a span of only 3 years, the bank’s SME book has grown 3 times. Similarly, BOP’s SME customers’ base has grown 6 times from where it was in Jan 2021. These accomplishments were achieved despite an era marked by historically high interest rates and challenging economic conditions that strained business revenues and escalated the financial cost of SMEs.

The road to this success was not easy. The bank started off with the agenda of making SMEs a Priority Sector, and a Sub Committee of the Board of Directors was formed to oversee the Priority Sectors’ Lending. The bank adopted a holistic 360-degree approach “BOP SME ASAAN”, focusing on both Financial Inclusion and Non-Financial Advisory. By understanding the unique needs of Small and Medium-sized Businesses, BOP has developed innovative and customer-centric solutions, empowering entrepreneurs help promote sustainable growth across the sector.

BoP’s digital transformation has been at the core of its strategy to revolutionize banking for SMEs, leveraging advanced technologies like Open Banking, AI-driven models, and end-to-end (E2E) digital lending products. Central to this transformation is a state-of-the-art Loan Origination System, paired with proxies, predefined feasibility studies and real-time document collection, which ensures a seamless experience for SMEs.

BoP has also integrated AI-based models and regression-based statistical scorecards into its loan approval processes, allowing for precise and tailored financial solutions. These innovations, including hybrid application scoring models, reducing traditional reliance on collateral, enable SMEs to access quicker and tailored financial support. BOP’s eBusiness Qarza, Pakistan’s first fully digital, collateral-free commercial Banking product, is a testament to this shift, offering flexible and fast financial solutions. Since its recent launch, SMEs have received more than Rs. 1 billion loans, showcasing the product’s success in providing accessible capital for SMEs through End-to-End (E2E) Digital means.

In another pioneering step, BOP established a Digital Branch at the National Aerospace and Technology Park (NASTP), supporting Tech SMEs. Tailored Cash Management and Payroll solutions have been devised to enhance operational efficiency. The BOP Biz Platform revolutionizes business operations with seamless funds transfers, payroll management, allowing effortless disbursements at the click of a button. Complementing this, BoP’s tailored collection services optimize cash flow for diverse business needs. Designed to enhance financial efficiency and operational performance, the platform empowers SMEs to excel in a competitive market. The bank has processed over 100,000 transactions in 2023, which stand as a testament to its effectiveness and growing adoption.

By delegating credit approval, BOP has empowered teams to make quicker decisions, reducing wait times for SMEs. This approach streamlines the loan process, ensuring faster disbursement and improving customer satisfaction, while allowing the bank to better address the unique needs of SMEs across different geographies.

BoP had introduced a Hub-and-Spoke model for the SME segment, strategically placing resources closer to entrepreneurs. This network of specialized hubs enhances accessibility, allowing SMEs to tap into localized support and expertise. By bringing services to the entrepreneurs’ doorstep, BoP has increased responsiveness and better address the specific challenges faced by businesses in different areas.

BOP’s commitment to sustainability is evident in its Green Banking Initiatives. The bank has financed the conversion of hazardous brick kilns in Punjab to more environmentally friendly Zig-Zag technology. Such efforts reflect BoP’s dedication to eco-friendly financing solutions within the SME space.

Strategic partnerships: catalysts for growth

Strategic partnerships have been a catalyst for BoP’s SME growth strategy, driving innovation and expanding access to specialized financial solutions. The bank’s involvement in the globally renowned SME Finance Forum, managed by the International Finance Corporation (IFC), has given it access to international best practices, risk mitigation tools, and cutting-edge financial solutions. Partnerships with organizations like Circle, CARE Pakistan, Google Cloud, and various chambers have allowed BOP to champion innovation, promote digital solutions, and mentor women entrepreneurs. By connecting SMEs with such global networks, BOP ensures that they have the tools to compete at both local and international levels.

The Bank of Punjab (BoP) has solidified its position in journey of excellence, earning consecutive wins as the Best Bank for Small & Medium Businesses in 2022 and 2023 by the Pakistan Banking Awards (PBA). Building on this momentum, BOP was named The Best SME Bank in Pakistan in 2024 by The Digital Banker, The Best Domestic SME Bank 2024 by Asian Banking and Finance and Pakistan’s Best Bank 2024 for SMEs by Euromoney. On the global stage, BOP secured a coveted spot among the Top 100 Banks at the Global SME Finance Forum Awards 2024 as “SME Financier of the Year.” With these remarkable achievements, The Bank of Punjab stands tall as a proud leader, setting new benchmarks in SME banking excellence both locally and internationally.

Financial literacy has been another focal point of BOP’s strategy. Awarded the Financial Literacy Champion Bank Award, the bank has led impactful financial education initiatives under the National Financial Literacy Program for Adults (NFLP-A). MSMEs Week 2024 highlighted BOP’s unwavering commitment to micro, small, and medium enterprises through a range of financial and non-financial services. At the DigiBAP Summit 2024, BOP’s CEO led conversations on digital supply chain finance, fintech innovations, and financial inclusion strategies, reinforcing BOP’s leadership role in these critical areas.

BoP’s Non-Financial Advisory Services (NFAS) programme has guided about 7,000 enterprises, enhancing their strategic and operational capabilities. BOP’s SME Business Facilitation Window has further supported start-ups with pre-feasibility studies, tax registration, and business projections. WhatsApp Banking has been introduced to offer real-time customer support and convenience, further solidifying BOP’s commitment to customer-centric service delivery.

In an era where SMEs are the backbone of economic growth, BOP has emerged as a transformative force, redefining how financial institutions engage with this vital sector. By integrating innovative technology, forging strategic partnerships, and championing financial inclusion, BOP is not just supporting businesses but empowering them to thrive in a competitive landscape. Its holistic approach, embedded with financial and non-financial services, demonstrates a deep understanding of SME challenges and aspirations. As Pakistan’s SMEs grow, the future promises a more inclusive and robust economy—where Small and Medium Enterprises truly lead the way to national prosperity, and BOP remains fully committed to play its due role in this inspiring journey.

Copyright Business Recorder, 2024