An Analytical Over View of Bank Loans Extended to SMEs in Pakistan

Author(s)

Dr.Munawwar Ali Kartio , Dr Albeena Mirza , Farhan Zeb Khaskhelly ,

Download Full PDF Pages: 96-103 | Views: 308 | Downloads: 88 | DOI: 10.5281/zenodo.3469225

Volume 6 - April 2017 (04)

Abstract

Small and Medium Enterprises are the back bone of economy and are considered to be locomotive for the economic development for the developed as under developed economies. In the present economic scenario no one can ignore the importance and role played by SMEs in the overall rise of standard of life, reduction in poverty, provision of employment, foreign exchange earnings and GDP growth. Economy of Pakistan has substantial potential for the growth of this segment but unfortunately desired benefits could not be obtained for variety of reasons including political instability ,continuity in economic priorities and policies ,law and order situation prevailing in the country ,lack of infra-structure ,energy crisis ,most important hurdle is access to bank lending at concessional rates. The central bank of the country with collaboration of SMEDA is playing an important role to make bank finance available which is as important for SMEs as oxygen for human body but so far desired results could not be achieved in true sense as banks are shy to allow lending facilities, most importantly due to lack of collateral to cover the risk. SBP reports revealed that cash flow based lending is discouraged instead collateral based lending is focused. Bank lending allowed to SME sector comprises around 6 % of total finance allowed to private sector ,out of which major portion is extended within the limit of 0.5 million and only 5 % of total SME finance is extended as clean loan. 

Keywords

SME, Bank Loans, SBP, Pakistan

References

  1. ADB. (1999). Private Sector Development Strategy: Promoting the Private Sector for Growth and Poverty Reduction. Manila: Asian Development Bank, retrieved from www.adb.org/Documents/Policies/ Private _Sector/private. pdf on 2 August 2007.
  2. Bari, & Ali & Haque, (2005). SME development in Pakistan: Analyzing the constraint on Growth. Pakistan Resident Mission Working Paper No .3, Islamabad: ADB.
  3. Beck, & Thorsten, & Asli & Ross Levine. (2004.) SME, Growth, and Poverty: Cross-Country Evidence, World Bank Policy Research Working Paper 3178, accessed from https://rru.worldbank.org/PapersLinks/Open.aspx?id=2478 (on 9 October 2007). .
  4. Capacity Building, 2nd OECD Conference of Ministers Responsible for Small and Medium-Sized enterprises, Istanbul, Turkey, (3–5 June,2007) accessed from http://www.oecd.org/dataoecd/6/7/31919278.pdf (on 24 September 2007).
  5. Cerasela Pirvu and Laura Giurca Vasilescu and Anca (2008), “Banking financing for Romanian SMEs- Challenges and Opportunities
  6. Kashif Hamid and Abaidullah (2006), “Financing the Small and Medium Enterprises in Faisalabad”.
  7. Rehana Kousar, Anum Durani, Farheen Zahra Hussain and Masood ul Hasan (2012), “Investigation of Banker’s Lending Criteria to SMEs and Assessment Thereoff
  8. Sas Aruwa (2013), “Financing Options for Small and Medium Scale Enterprises in Nigeria”.”.
  9. Syed Kamran Sherazi, Muhammad Zubair Iqbal, Muhammad Asif, Kashif-ur-Rehman and Syed Saad Hussain Shah (2013), “Obstacles to Small and Medium Enterprises in Pakistan, Principal Component Analysis Approach”.

Cite this Article: