Mismanage-ment in the Small and Medium Enterprises (SMEs) Bank Ltd ranged from incompetence to ineffectiveness, non-professionalism, unqualified and devoid of vision plan or objective and called for the removal of the sitting president/CEO. These were some of the damning findings of the subcommittee of National Assembly standing committee on finance and revenue.
The report, available with Business Recorder, adds that billions of rupees had been spent extravagantly in the name of restructuring since the inception of the SMEs bank. Branches were closed unnecessarily - from 96 to 14 - and area offices from 20 to 0. Under 'Voluntary Separation Scheme' (VSS), regular staff strength was reduced from 1100 to 315 in 2004.
However, appointments on the basis of nepotism led to a rise in staff strength to 650, which adversely affected yearly recovery and profitability of the bank. According to a report, incompetent contractual executives at the helm of affairs. with no relevant experience, naturally proved ineffective and inefficient. Performance of contractual staff was marginal or unsatisfactory while banking operations by contractual executives suffered losses for the last 5 to 6 years.
Jobs at SME Bank were awarded on the basis of influence/nepotism and not on qualifications or experience. This accounted for an ex-army man, with no legal background, being appointed as the man in charge of litigation. There are numerous other such cases of obvious mismatch between the job requirements and the qualifications/experience of the incumbent.
However, salaries are very high, ranging from Rs 0.2 million to 0.5 million per month with other perks and facilities. The President costs the bank more than Rs 0.6 million per month. Luxurious spending and frequent travel/tours, without any back-to-office report on record leaves it open to allegations of misuse.
The subcommittee, after thorough deliberation and investigation in all issues of the bank, finally recommended that instead of privatising and investing of the government of Pakistan for creation and establishment of a new SME financial institution the present SME Bank Ltd should be restructured, revitalised and reformed. The subcommittee submitted suggestions for revival of the present SME Bank Ltd as follows:
(1) No private bank prefers lending for the establishment of small business/shops/manufacturing units because lending to these businesses involves high cost & risks. For the sake of SMEs development, SME Bank should continue its lending & banking services to SME sector with more dedication & target-based approach. The bank should be run as development/specialised bank rather than as a commercial bank.
(2) SME Bank should be assigned with annual targets in terms of fund & non-fund based facilities to SME sector and periodic performance should be reviewed at top level,
(3) SME Bank is also capable to implement the new government sponsored self-employment generating schemes that schemes should be launched through SME Bank Lid.
(4) Network of the bank should be expanded all over the country to increase its outreach.
(5) It is evident from above facts that failure of the bank is due to mismanagement of resources, inefficiency and inexperience of top executives (who are on the helm of affairs), lack of leadership of the President (who is just passing time after his retirement and has no urge to run the bank rather to get bonus in the shape of monthly salary allowances). So, this Bank can be run only by changing the management. With induction of some prudent banking executives, low performance of the bank can be turned to high without any additional cost.
(6) It is also learnt that the President is making arguments for laying of regular staff to curtail the salary bill and is requesting for funds to pay VSS/terminal benefits. In fact, the management is blaming continuously regular staff just to cover its own follies, inefficiencies and wrong policies. The salary bill can be slashed, if the services of heavily paid contractual officers/executives doing nothing are laid off and interestingly no funds are required to do so.
(7) Liquidity position can be improved by en cashing PIBs (around 2.0 billion) which are incurring loss to the Bank. Further, funds demanded for laying off staff may be utilised/recycled for financing SMEs. Salary bill may be reduced by laying off contractual employees, doing nothing. Salary bill for regular employees may be rationalised. Credit lines may be arranged by the new management.
(8) Government and public sector owned institutions may be bound to maintain their deposit accounts with SME Bank Ltd.