The Union of Small and Medium Enterprises (UNISAME) urged the State Bank of Pakistan (SBP) to enhance credit to the micro, small and medium enterprises (MSMEs) sector to boost exports and also increase the credit ceilings in the prudential regulations.
UNISAME President Zulfikar Thaver said in view of the declining exports it was very necessary that the SBP comes up with schemes to enhance the credit to the MSMEs who need priority financing facilities at subsidized rates to meet global challenges.
Thaver pointed out that MSMEs were facing difficulties in obtaining pre-shipment and even post shipment financing from commercial banks due to their mindset. It is very important for the SBP to emphasize the need for the practice to accept non tangibles as collateral to broaden the scope of risk management.
He said MSMEs who were exporting goods to third world countries were facing refusal from commercial banks which were not willing to finance against letter of credits (LCs) from third world countries and banks of low rating. In order to boost exports it is very important that LCs from third world countries and low rating banks are accepted for negotiations and discounting after being covered by insurance or confirmation by first class banks.
UNISAME is keen that the financing to MSMEs is enhanced to enable the sector to export to the non traditional global markets. Their is scope for export of non traditional items also and the home based, cottage industries, small to medium sized enterprises could be facilitated to export their wares. In fact the MSMEs should be financed against firm orders to enable them manufacture the ordered goods and on shipment their bills drawn on overseas buyers be discounted. In many countries the practice of avalization is widely adopted whereby the buyers bankers simply avalize the bills making it good for payment on due date and returning it to the sellers bank which then discounts the bill without hesitation. There is need for our commercial banks to modernize banking in view of the challenges.
There is also urgent need to increase the limit of rs 500000 to rs 1 million for finance to micro enterprises to promote the home based and cottage industries as half a million rupees limit is proving insufficient for some export oriented units.
UNISAME has proposed to SBP to examine the aspects of exports to third world countries and to seek expert advise on the subject and to study the basis of how other countries of the world are exporting to third world countries and financing their MSMEs and enhancing credit to the majority sector and boosting their exports.
