Lahore, January 13, 2017 (PPI-OT): The Small and Medium Enterprises Development Authority (SMEDA) concluded the consultation process on Credit Guarantee Scheme plan for SMEs at the final consultative meeting held today at SMEDA head office with bankers and SMEs, who have recommended to submit the plan as a major budget proposal this year to establish a Credit Guarantee fund with at least US dollar 25 million. Mr. Muhammad Alamgir Chaudhry, General Manager Outreach Division of SMEDA presented address of welcome to the participants. Whereas, Mr. Sheharyar Tahir, Head External Relations Department of SMEDA and Mr. Imran Ahmad of the SBP conducted proceeding of the meeting. The meeting was widely attended by representatives of banks, Development Finance Institutions, private sector and the government’s business development agencies. The prominent participants included Mr. Rehmatullah Javed, Chairman Standing Committee of FPCCI on SMEs, Mr. Imran Ahmad from the State Bank of Pakistan, Mr. Irfan Ahmad, Vice President, NBP, Mr. Liaqat Mehmood from Askari Bank, Mr. Muhammad Shahid, Branch Manager, Pak-Brunei Investment Company, Ms. Rukhsana Bukhari, Vice President First women Bank Limited, Mr. Ali Abbass from Bank Al Habib, Mr. Sikandar Abbasi, CEO, FINCON, Mr. Raza Hafeez Shami, CEO, RM Engineering Industries, Mr. Farid Ahmad, RVP Albarqaka Bank, Mr. Naveed Ahmad, Vice President BOP, Mr. Naveed Nasir from ABL, Mr. Behram Bashir, VP, SME Bank Limited, Mr. Sultan Tiwana, Private Consultant, FINCON, Mr. Shehzad Latif, SVP, Soneri Bank Limited, Mr. Tanveer Ahmad Haral, Head Strategic Marketing, NRSP Microfinance Bank, Mr. Shehbaz Sarwar, Additional Registrar, SECP, Mr. Saleem Akhtar, Channel Manager SCBL, Mr. Sohail Siddiqui, Product Manager SME, Bank Al Falah, Ms. Aysha Aamer, Chief Manager, Bank of Khyber, Mr. Saqib Ayaz, Regional Head SME, Samba Bank and Ms. Nadia Jahangir Seth, Head Policy and Planning Department of SMEDA.
Mr. Muhammad Alamgir Chaudhry, in his address of welcome, acknowledged that strong patronage from State Bank of Pakistan, the SMEs were having better access to finance as compared to negligible access available in the past. However, the banking industry is still not comfortable to issue the adequate credits to SMEs due to high risk, which can be covered by introducing a Credit Guarantee Scheme commonly being practiced in plenty of the growing economies in the World, he said and informed that SMEDA, taking cognizance of the need had developed a comprehensive feasibility study for the required scheme under aegis of the Investment Promotion Unit, jointly organized by the United Nations Development Organization (UNIDO), SMEDA and Government of Italy. A continued consultation process in collaboration with the State Bank of Pakistan was started last year to have the feedback from government of Pakistan, bankers, SMEs, trade bodies and other relevant stakeholders, the concluding episode of which has been arranged at head office of SMEDA, he added.
The presentations given by SMEDA, State Bank of Pakistan and FINCON revealed that the formal lending of SMES in Pakistan was much less than the actual requirement. According to the feasibility study compiled by FINCON for UNID0-SMEDA-ITALIA Investment Promotion Unit, the SMEs were being provided only 6% of the total formal lending by financial institutions, whereas the share of SMEs’ lending in our neighbouring countries is around 30% of the total credits. The default risk in the SME-based economies of the world have been covered by the Credit Guarantee Schemes and there are more than 2, 250 credit guarantee schemes (CGS) in 100 countries of the world. Therefore, the feasibility has offered a complete mechanism for creating a full-fledge Credit Guarantee scheme for SMEs in Pakistan, proposing major chunk of funds from international donor agencies, World Bank, USAID, DFID and Italian Development Cooperation. As per the feasibility, Credit Guarantee Scheme fund should be up to USD 25 million and the investment in fund is expected to generate approximately 0.5 million direct jobs followed by a GDP of Rs. 250 Billion and an additional tax revenues up to Rs. 33 billion over ten years. The government of Pakistan may be asked to share 20 % of the total required fund or to match the equal amount of fund as to be generated through donor agencies and the fund would be managed by setting up a Credit Guarantee Fund Company to be working as a Public Limited Company.
It is notable that stakeholders meetings earlier held in Karachi, Peshawar and Islamabad have also unanimously recommended to take up the feasibility of CGS with government of Pakistan. Therefore, SMEDA, as per recommendation of the concluding consultative session held today would submit the detailed feasibility as the major proposal for the forthcoming Federal Budget 2017-18.
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Small and Medium Enterprises Development Authority (SMEDA)
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