KARACHI – The Non Performing Loans (NPL) in the SME Sector registered an increase of over Rs 5.1 billion ballooning to Rs 96 billion by end of December 2010. According to a report prepared by the SBP SME Finance Department, NPLs increased from Rs 91.6 billion at the end of December 2009 to 96.5 Billion at the end of December 2010, constituting about 19.4 percent of total NPLs incurred by the banking industry.
The recorded quarterly increase was 5.4 percent compared to a rise of 4.4 percent during the corresponding quarter of 2009. Of the total amount, about 80.4 percent is attributed to working capital finance, 16.4 percent to fixed investment finance, and the remaining 8.6 percent to trade finance.
It also revealed that there has been a sharp rise in NPLs since December, 2007 mainly attributed to the economic slump being faced by Pakistan which has been further aggravated by the unprecedented floods. Furthermore, the increase in SME NPLs is also consistent with the rise in total NPLs of banking industry which too recorded a quarterly rise of 3.1 percent at the end of the period under review.
It was pointed out that the share of Public Sector Banks such as NBP, FWBL, BOP, BOK and Sindh Bank constituted about 13.5 percent of the total outstanding amount ran up by SMEs at the end of the reporting period, recording a rise of 28.0 percent in their total outstanding share towards SME sector. The share of private banks in total SME outstanding was 82.0 percent, the highest in the banking sector. This category of banks consists of 19 banks.
The outstanding amount in absolute terms was Rs 274 billion; moreover, it too recorded a quarterly rise of 6.8 percent. Among private banks, HBL has the highest share of 15.6 percent followed by ABL bank with 9.4 percent, Bank Alfalah with 9.0 percent, and NIB with 7.8 percent respectively in total SME financing. This category of banks contributed about 11 percent of their overall outstanding portfolio in the SME sector.
The absolute amount incurred by Islamic banks in the amount at the end of December, 2010 was Rs 4.3 Billion constituting about 1.3 percent of the total outstanding amount. This category of banks indicated a quarterly decline of 0.2 percent and 19.8 percent in the outstanding amount under the SME head and borrowers respectively.
Moreover, NPLs recorded a rise of 6.3 percent at the end of the period under review. The low share of Islamic Bank’s towards SME Sector is primarily due to the fact that the major chunk of their overall portfolio (87 percent) is taken up by corporate and consumer sectors. The absolute amount outstanding against foreign banks declined from Rs 1.68 Billion (at the end of September 2010) to about Rs 0.6 billion at the end of December 2010, forming 0.2 percent of total SME financing in the country.
The share of foreign banks did not see any significant improvement as their major chunk of overall portfolio targets in the corporate and consumer sectors. The SBP report further pointed out that government, recognising the severity of economic and social impact of recent floods, announced a number of relief packages for affected borrowers which are being implemented by State Bank in consultation with relevant ministries.
According to a census of establishments conducted by the Federal Bureau of Statistics (FBS), there are about 3.2 million economic establishments in Pakistan. Out of these SMEs, 90 percent of all private enterprises employ approximately 78 percent of non-agricultural labor force.
