State Bank of Pakistan, Governor, Yaseen Anwar has stressed upon the banks to give top most priority to SME banking with a view to ensuring uninterrupted flow of financial access to SME sector in the country.
Speaking at the signing ceremony of the Project Document between the State Bank of Pakistan and Bank Alfalah under the DFID-funded Financial Inclusion Programme (FIP) at SBP, Karachi, he said the role of banks, especially of mid-tier banks, was crucial to ensure unhindered flow of financial resources to the SME sector which was the engine of economic growth in Pakistan, ‘Though many banks in the market are trying to improve their market position in order to serve the sector more effectively, the current level of SME finance as well as an overall level of SMEs’ access to banking services remain unsatisfactory, and hence call for more serious efforts on part of the banks,’ SBP Governor added.
Anwar said that SME financing is very close to his heart due to its key significant contribution in the economic development of Pakistan. ‘The SME sector plays an important role in employment generation, poverty alleviation, and equitable distribution of resources and is the engine of growth,’ he added.
He pointed out there were 3.2 million economic establishments, of which 99% were SMEs, and SME sector represented over 90% of all enterprises and employed 75% of the non-agricultural workforce and contributed 30% towards the national GDP. ‘However, despite its strong contribution in employment generation, exports, and national income, the SME sector is severely constrained in access to finance which is crucial for its growth,’ he added. SBP Governor advised the banks to study the international examples of successful SME banking models which include Retail-based Model for Mass SME, Relationship-based banking, Advisory-based lending services, Segment-based Model, and Supply-chain linked Model.
Regrettably, he said that despite its immense significance and potential, the SME sector in Pakistan remained largely financially excluded, the current level of financing facilities to this sector stood at Rs. 253 billion, constituting only 7% of the banks’ total advances.
Anwar said that with the SBP- Bank Alfalah and International Finance Corporation (IFC) nexus, and the generosity of DFID, we could have more joint ventures of this sort in the future that would lead to a sustainable, sound and integrated financial system, characterised with ready access to finance, diversified loan portfolio and extended outreach to SMEs.
He said the State Bank, under the DFID-funded Financial Inclusion Programme (FIP) would provide funding support to Bank Alfalah (BAF) in undertaking the IFC SME Advisory Project. ‘The main objective of the project is to create a symbolic podium which can position Bank Alafalah to cater to the financing needs of the SME sector including the S and M segments through a holistic banking and advisory services solution,’ he added.
SBP Governor said the SMEs need to be addressed through innovative credit assessment tools and techniques like credit scoring and capacity enhancement of the financial service providers, and an integrated approach to SME Banking.
DFID and SBP were keen to upscale FIP to reach out the unbanked segments in Pakistan. Going forward, FIP funds would also be targeted to improve financial inclusion through SMEs banking, Anwar added.
Speaking on the occasion, the British Deputy High Commissioner, Francis Campbell said the signing of this project highlights the significance of the relationship between Pakistan and Britain. He congratulated Yaseen Anwar, the Bank Alfalah President, Atif Bokhari for signing this project. He also appreciated the role of DFID and IFC in promoting financial inclusion in Pakistan.
Haroon Sharif, Head of Economic Growth Group of DFID-Pakistan, Akbar Zaman Khan of IFC and President, Bank Alfalah, Atif Bokhari also spoke on the occasion.
The signing ceremony was attended, among others, by senior level officers of the State Bank, Bank Alfalah, IFC and DFID.
CHIDES BANKS OVER TIMELY TAX DEDUCTIONS: Meanwhile, the central bank on Monday asked the banks and the Development Finance Institutions (DFIs) to remain fully cognizant of their legal responsibilities in respect of timely deduction of applicable taxes on eligible transactions and corresponding credit to accounts of Government Treasury/Federal Board of Revenue (FBR).
“The discharge of this responsibility attains further importance at the close of the Fiscal Year, where all receipts and credits are to be reflected in the same time frame/fiscal year,” said an SBP circular issued Monday to the banks, DFIs and the microfinance banks (MFBs).
The regulator advised the banks, DFIs and MFBs to ensure that appropriate procedures were in place for timely credit of tax receipts in the FBR Account and the proceeds of all the taxes including Withholding Tax for the current fiscal year are transferred/ deposited to FBR Account, on or before the close of business i.e. on June 30, 2012 (being Saturday).
Further, the Withholding Tax on the profits paid by the Banks, DFIs and MFBs as on June 30, 2012 to the depositors should also be transferred/ deposited to the FBR Account on or before the close of business on June 30. “Accordingly, credible arrangements should also be in place to discharge such liabilities of off-line/far flung branches as of June 30, 2012,” it said.
The State Bank may verify compliance of the above instructions during its regular or targeted inspection of the banks, DFIs and MFBs, the SBP warned.
