APBF wants implementation as SBP enhances clean lending limit for SMEs

The All Pakistan Business Forum (APBF) has asked the government to announce soft financing with minimum markup and without any collateral for SMEs, appreciating the central bank’s recent decision of raising clean lending limit for Small and Medium-sized Enterprises to Rs10 million, expressing the hope the plan will be implemented in its true spirit.
The APBF President Syed Maaz Mahmood, while addressing a Board meeting, appreciated the banking regulator to amend the Prudential Regulations for SME Financing, specifically SME Regulation R-4, to raise the clean lending limit for an SME borrower from Rs5 million to Rs10 million, aiming to facilitate their access to finance.
The APBF office-bearers in their Board meeting forwarded several recommendations to the policy makers including the central bank and FBR so that the small industry could deal with the challenges posed by the present economic crisis.
The APBF meeting was held here with a view to deliberate the present poor economic scenario of the country, suggesting for concrete steps to keep industrial wheels running, especially of SMEs, saving the livelihood of millions of workers associated with the small and medium industries.
The meeting was briefed that the SBP issued a circular, advising the heads of all banks and Development Finance Institutions to ensure strict compliance with these regulatory measures, which are in line with the National SME Policy 2021.
The central bank had already revised the definition of SMEs by amending the respective regulations—Regulation SE R-1 and Regulation ME R-1. According to the revised definition, an enterprise with an Annual Sales Turnover (AST) of up to Rs150 million is categorized as a ‘Small Enterprise,’ while an enterprise with an AST between Rs150 million and Rs800 million falls under the ‘Medium Enterprise’ category.
APBF Chairman Ibrahim Qureshi asked the SBP to instruct banks to to ensure meticulous compliance of this decision. Non-compliance with the Prudential Regulations should result in punitive action under the relevant provisions of the Banking Companies Ordinance.
Ibrahim Qureshi said mere statements would not work unless solid measures are taken by the government, including a sizable reduction in fuel prices, bringing down key policy rate to single digit, regionally competitive energy rates and substantial cut in duties and taxes.
Syed Maaz Mahmood pointed out that it is unfortunate that the State Bank, in August 2017, had also introduced a financing scheme for Small and Medium Enterprises, enabling them to get loans without collateral but it was never implemented in its true spirit.
The scheme was launched to improve the SMEs’ access to finances in collaboration with the government aimed at enabling the businesses that cannot offer security or collateral to access bank finance.
The APBF President Syed Maaz Mahmood urged the central bank to announce a soft loan with minimum mark-up rate, especially for SMES to bailout their struggling businesses.
The forum called for significant cuts in import duties and waiver of sales tax, income tax and additional income taxes, which are still being charged in this time of grave crisis.
Maaz Mahmood asked the government to take concrete steps to keep the industrial wheels running especially of SMEs, to save the livelihood of millions of workers associated with the small industries. He said that we should keep our focus on support for cash flow management for SME sector and the government may prioritize its incentive preferences under the growth and importance for the economy.
He suggested that the authorities should reduce sales tax to at least 10% to improve demand generation, besides announcing interest-free loans to pay employees’ salaries.