Small firms vanished due to non-availability of credit line

Pakistan Businesses Forum (PBF) has said that small and medium enterprises (SMEs) have proved to be the engine of growth in several successful economies including Japan, South Korea, Taiwan and India and they have well supported by financial institutions but Pakistan’s economy has largely ignored this sector even in ongoing pandemic.
In a statement issued on Sunday, PBF President Sahibzada Mian Usman Zulfiqar said that SMEs are critical as they are an efficient vehicle for transferring the fruits of growth to different economic tiers of the society. They also provide export goods and at times provide valuable inputs to large exporting organizations.
Despite these benefits, over the past 70 years, this economic segment has been largely ignored by the policy-makers. According to a recent study SMEs holds a minimal share of the banking credit portfolio while the major chunk goes to corporate sector.
Usman told “availability of banking credit serves as a blood line for any business and credit flow in Pakistan is biased in favour of large corporate firms”
Due to this disparity, the gap between the rich and the poor has widened beyond imagination and Small firms have vanished, he added.
PBF President said, the recent State Bank of Pakistan’s (SBP) Refinance Scheme for Small Businesses in the light of COVID-19 has so far failed to take off as the commercial banks are not designed and fully equipped to provide credit line to Small and Medium Enterprises (SMEs). He said, due one of the major reasons, SBP’s Refinance Scheme for Small Businesses is failing to take off because our banks and their staff have never focused on credit support for SMEs.
The banks are still reluctant to go ahead at the desired pace despite the fact that the Ministry of Finance placed cost sharing mechanism with the SBP for providing Rs30 billion subsidy to banks for absorbing the first 40 percent default cases out of this scheme to protect jobs after the Covid-19 pandemic.
PBF were also of the view that SME’s were running from pillar to post to convince the commercial banks to lend them money but so far they were paying no heed towards their difficulties, Mr. Usman added.