Following the State Bank of Pakistan's initiatives, Small and Medium Enterprises (SMEs) financing witnessed a 6 percent growth during the last calendar year (CY14). According to SBP's Quarterly SME Finance Review December 2014, SMEs significantly contribute to GDP growth, exports and employment generation, therefore needs to be given due importance.
SBP has been taking initiatives for the promotion and development of SMEs banking, as a result of which the outstanding SMEs financing (domestic) increased by almost 6 percent to Rs 287.88 billion at the end of CY14 as compared Rs 272.53 billion in December 2013.
Quarter on Quarter (QoQ) basis, the outstanding of SMEs financing of the banks/DFIs increased significantly in October-December 2014 as compared to previous quarter. SMEs financing stood at Rs 240.7 billion as on September 30, 2014 which surged to Rs 287.88 billion as on December 31, 2014, showing an increase of almost 20 percent. In addition, SMEs outstanding financing climbed to 6.3 percent of total financing in October-December 2014 as compared to 5.5 percent in the previous quarter. However, the number of SMEs borrowers declined from 135,557 to 134,521 during the last quarter of 2014, while YoY basis; there was a decline of 6.7 percent.
Moreover, Non-Performing Loans (NPLs) of SMEs financing also witnessed a declining trend during the period under review. The NPLs indicated a declining trend due to conservative lending approach of banks/DFIs. In addition on the other hand it also shows that banks/DFIs tried to clean their overdue loans. With improvements in overall SMEs Financing of the industry, NPLs to loans ratio of SMEs financing decreased to 30 percent in December 2014 from 33 percent in December 2013.
The SBP said that declining NPLs trend would encourage banks/DFIs to lend more in this sector in future. Facility-wise break-up shows that the working capital financing constituted around 74 percent of total SMEs financing followed by fixed investment and trade finance with shares of 13 percent each. The facility-wise distribution of borrowers depicted the tilt of banks towards working capital financing and trade finance to SMEs borrowers.
Banking group-wise distribution of SMEs financing shows that the share of private sector banks in outstanding SMEs financing stood at 72 percent during the period under review. Private sector banks were followed by public sector banks, whose share stood around 22 percent of total SMEs financing at the end of CY14.
Five full-fledged Islamic banks provided 2.4 percent of SMEs financing and combined with the financing of Islamic banking divisions of conventional banks, the total SMEs financing of Islamic banking industry came to nearly 6 percent of outstanding SMEs financing in December 2014, which was higher than last year's share of same quarter.
Giving details of the Prime Minister Youth Business Loans (PMYBL) Scheme, the SBP said that the scheme was launched by the Prime Minister on December 7, 2013 for promoting youth entrepreneurship in the country and against approved cases in the two ballots, National Bank Limited (NBP) disbursed 4,545 loans amounting to Rs 2.580 billion as of September 30, 2014, whereas 76 loans amounting to Rs 95.2 million were disbursed by First Women Bank Limited during the period.