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BANKS SHOULD LEND MORE

MONEY TO SMES
Contents:

 Introduction to SMEs
 Why banks lend more money to SMEs
 Problems faced by SMEs in Pakistan
 Policies of Banking sector in promoting SMEs
Introduction to SMEs:

 Small and medium enterprises are the business that maintain

revenue, assets or number of employees below certain level.
 The criteria for determining SMEs varies among countries and
industries.
 There is no uniform definition of SMEs in Pakistan.
Why Banks lend more money to SMEs

They play a significant role in national economy:

 By providing various goods and services
 Creating job opportunities, developing regional economies and
communities.
 Helping the competition in the market and offering innovation.
 SMEs are the main source of poverty alleviation.
 They also help in industrial and social development of country.
 Expand market diversity and productivity.
Problems coped by SMEs:

 Severe electricity load shedding and disconnection of Sui Gas

supply for industries.
 Lack of alternative resources to generate power as corporate has.
 Increasing trend in the cost of input.
 Deteriorating political, law and order situation in the country.
 Bad policies of Government.
 Less of the investment ability of financial investor institute like
State Bank Of Pakistan.
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 Lack of technical skills

 Taxation
 Lack of market information
 Lack of skilled of human resource
 More interest rate

Because of these problems share of SMEs in total private sector credit has
declined from 17% in 2006 to 7.5%
Policies of Banking Sector in promoting
SMEs
 Following are the products offered by banking sector:
 Rice Paddy Advances
 Cotton Ginners Advances
 Credit Facilities against liquid securities
 Running Finance For SMEs
 Alfalah Karobar Finance
 Alfalah Milkiat Finance
 Alfalah Quick Finance
R

To increase the number of SMEs from 170000 to 700000 by 2023 the

Govt has change the taxation policy through finance Act 2019.
Tax rate is reduced from 35% to 20% imposed on income of banking
companies.