Banks urged to lend a helping hand to SMEs

Analyst Ateeq Ur Rehman has said it is encouraging to note that the government has decided to enhance private sector credit for Small and Medium Enterprises (SMEs), ie, from 7.5 percent to 17 percent by 2023 and borrowers from Rs200, 000 to Rs300,000. Commercial banks would be required to shun their reluctance to lend to SMEs, he added.

The recent conference on SMEs in Islamabad was a great effort to recognize the SMEs of Pakistan, redress their grievances, address issues such as unemployment/easy access to finance and strengthening the coordination between SMEs and authorities, he maintained.

He said Pakistan's SME sector which contributes 40 percent to the GDP, constitutes 90 percent of the enterprises, employs 80 percent non-agricultural workers and contributes 25 percent to exports had been neglected by previous governments.

SMEs are the backbone of our economy but unfortunately they are facing major challenges, especially the access to finance, hike in interest rate, higher rate of taxation, collateral and erratic policies.

Cash flow is a major problem for SMEs because of non-availability of easy access to finance.

Moreover, in high interest rate environment it is unlikely that SMEs sector can trigger expansion or increase investment. The lackluster performance in almost all sectors reflects slowdown in the ongoing fiscal year.

It is so difficult to understand as to why this sector is missing from the financial infrastructure of Pakistan. Only on supplication of doubtful finances including non-performing loans in the past has resulted in erosion of equity. Pakistan's economic downturn has exacerbated these problems. The rising cost of doing business and soaring cost of production has added to SMEs' woes.

Due to hike in cost of imported raw material and the rupee depreciation against the USD coupled with additional custom duty and additional sales tax, SMEs are continuously absorbing these losses on their balance sheets.

Absence of finance has frustrated the development of this vital segment of the economy.

Support to SME is necessary for job growth, poverty alleviation and economic boost. He urged the authorities concerned to include representatives and experts from SMEs in such conferences.