Speakers for registration of SMEs with regulatory bodies

Speakers at a seminar Tuesday stressed the need for registration of Small and Medium Enterprises (SMEs) with regulatory bodies so that essential liquidity can be provided to them for sustainable growth.

Speaking at a seminar "Pakistan Innovative Finance Forum (PIFF)", organized by the Asian Development Bank (ADB) and others, speakers said that SMEs have huge potential to address issues like unemployment.

Head Asian Development Bank Institute (ADBI) Dean Naoyuki Yoshino speaking on the subject of credit guarantee schemes for SMEs and Hometown Crowd Funding for Startups said that the SMEs are the backbone of the Asian economy and make up over 96 percent of all Asian businesses that provide two out of three private sector jobs in the continent.

Therefore, it is vitally important for the Asian economies' success that they have fully functioning support measures for the SMEs. However, SMEs face major challenges in accessing cheap finance, mainly because there is an asymmetric information problem between suppliers and demanders of funds, which hinders their growth. He said that it is important for Asian economies, especially for lower-income countries, that the SMEs represent the main parts of their economies to diversify channels of financing of SMEs. Asian economies also need to accumulate the SME data in a nationwide database for categorizing SMEs based on their creditworthiness.

According to Yashino, those are ranked higher get higher credit guarantees from the government at lower costs, so that they can be successful and thus having a significant role in job creation and in production. While those that are risky should avoid borrowing from banks, because if they use bank loans it will cause nonperforming loans. For promoting startups and riskier SMEs, community-based lending such as hometown investment trust funds should be provided.

Speaking on the subject "the credit risk database (CRD) for assessing SMEs credit worthiness-experience in Japan," Satoshi Kuwahara said that CRD makes it possible to mitigate the problem of information asymmetry between SMEs and financial institutions and contributes to improving SMEs' access to finance by collecting a large number of financial statements through the mechanism of SME finances and establishing a robust statistical model.

He said, "We use the CRD in Japan, confirm the situation in Japan, and highlight the CRD's contribution to evaluating the creditworthiness of SMEs." He hoped Japanese experience contributes to the introduction of a statistical credit risk database composed of a large number of anonymous financial statement data in other countries including Pakistan and that the CRD helps improve SMEs' access to finance as a financial infrastructure .