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SME Development Initiatives State Bank of Pakistan Muhammad Ishfaq Sr. Joint Director, I H &SME Finance Department State Bank of Pakistan
SME Development Initiatives
State Bank of Pakistan
Muhammad Ishfaq Sr. Joint Director, I H &SME Finance Department State Bank of Pakistan
Development Initiatives
1. Refinance Schemes
2. SME Credit Guarantee Scheme
3. Capacity Building of Banks
4. SME Cluster Development Surveys
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SBP Credit Schemes 4
Export Finance Scheme (Islamic & Conventional)
Long Term Financing Facility for Plant and Machinery (LTFF)
Refinance Facility for Modernization of SMEs Financing Facility for Storage of Agricultural Produce
(FFSAP)
Scheme for Financing Power Plants Using Renewable Energy
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Sector-wise Outstanding Financing Under EFS
Sector Outstanding
As on 30-Jun-11 (Rs in Billions)
% Share
Textile/Textile Products 119.35 62.66 %
Edible Goods 4.89 2.57 %
Leather/Leather Goods 11.66 6.12 %
Machinery 1.38 0.73 %
Metal Products 2.29 1.20 %
Rice 20.92 10.98 %
Carpets 2.05 1.08 %
Cement 8.68 4.56 %
Sports Goods 2.87 1.51 %
Other Commodities 16.37 8.59 %
Total 190.46 100.0 %
(Rs. in million)
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Sr.# Long Term Financing Facilities (LTFF) Sector-wise Net Outstanding
1 Textile Sector 17,248.7
2 Engineering Goods 4,357.0
3 Fisheries 169.2
4 Fruits / Vegetable & Processing 828.1
5 Leather & Leather Products 159.8
6 Marble & Granite 875.0
7 Rice Processing 1,751.8
8 Ethanol -
9 Pharmaceutical 197.9
10 Generators/Captive Power Plans 1,635.2
11 Others Sector (Cement Sector) 527.3
Total 27,750.1
Background:
SMEs plays an important role in creation of employment opportunities, economic growth, poverty reduction and equitable distribution of economic prosperity.
Limited access of SMEs to financing facilities from the formal sources.
Fixed investment financing of SMEs constitutes a small proportion of total SME Financing.
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Financing to SMEs
Period Total SME Financing (Rs. Billion)
SME Fixed Investment (Rs. Billion)
% share of Fixed Investment
December 2009 359 41 11%
December 2010 334 36 11%
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Objectives:
Improve SMEs access to finance
Originally introduced for Rice Husking and Cotton Ginning
SBP extended the scope of the Scheme on May 6, 2010.
Facilitate SMEs to modernize their Units to produce quality
products & improve value added chain.
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Eligibility: SME borrowers – defined in Prudential Regulations for
SMEs.
Financing: New imported/local Plant & Machinery for BMR of
existing/setting up of new units.
New generators up to 500 KVA.
Validity: December 31, 2012.
Financing limits: Up to Rs 9.312 Billion have been
allocated under the scheme
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Illustrative List of SME Sectors:
Rice Husking
Cotton Ginning
Power Looms
Dairy & Livestock
Cutlery & Stainless Utensils
Surgical Instruments
Marble & Granite
Engineering Goods, (Electronic)
Fisheries
Packaging / Processing of Fruits / Vegetables
Furniture
Gems & Jewellery
Sports Goods
Agro-based Industry
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Tenor of loan is 3-10 years with markup rates of 8% to 10% as under:
Tenor
Rate of Refinance
Banks’/DFIs’ Spread
End Users’ Rate
Up-to 3 years 5.50% 2.50% 8.00%
Over 3 years and up-to 5 years
6.25% 2.75% 9.00%
Over 5 years and up-to 10 years
7.00% 3.00% 10.00%
Maximum grace period: Six Months
Tenor & Pricing:
Introduction:
Agriculture is the mainstay of Pakistan Economy having
about 22% contribution in GDP.
Insufficient storage capacity of agriculture produces –
about 90% of grains and fruit & vegetable are improperly
stored .
Wastage of large portion of agricultural produces every
year due to improper storage facilities.
Post harvest loss of grains in the range of 15-18%.
Financing Facility for Storage of Agricultural
Produce (FFSAP) SMEFD Cr. 8/2010 13
Objectives:
Reduce post harvest losses of agriculture produce.
Enhance quality storage capacity of food grains, fruits &
vegetables, fish & fish products, etc.
Promote marketing of the target sector.
Financing Facility for Storage of Agricultural Produce …cont’d
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Financing Facility for Storage of Agricultural
Produce …cont’d
Scope:
Establishment, Expansion and BMR of Steel/Metal/ Concrete Silos,
Warehouses & Cold Storage facilities .
New imported/local Plant & Machinery/ Equipments/ Accessories.
Generators with maximum capacity not in excess of in-house
energy requirements.
Up to 65% cost of entire Civil Works.
Maximum Financing Rs 500 million [for a single project]
Financing Limits: Up to Rs 5.825 billion have been
allocated under the Scheme.
Validity: Dec. 31, 2012.
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Financing Facility for Storage of Agricultural
Produce …cont’d
Tenor of loan is 3-7 year with markup rates of 8% to 10% as
under:
Tenor Rate of Refinance
Banks’/DFIs’ Spread
End User’s Rate
Up-to 3 years 5.50% 2.50% 8.00%
Over 3 years and up-to 5 years
6.25% 2.75% 9.00%
Over 5 years and up-to 7 years
6.50% 3.50%
10.00%
Maximum grace period: Six Months
Tenor & Pricing:
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Scheme for Financing Power Plants SMEFD Cr.19/2009
Objectives:
Meet Growing electricity demand
Promote renewable energy projects in the country
To change the power generation mix and reduce reliance on
imported fuel.
SBP introduced the Scheme on December01, 2009
Financing for establishment of new Power Projects Using
Renewable Energy with a capacity of up-to 10 MW
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Eligibility:
New Projects with maximum capacity of 10MW.
Requirements of AEDB, concerned regulatory authority and
other Government departments in compliance with the
prevalent Renewable Energy Policy of GoP are to be fulfilled .
Financing :
New imported/local Machinery for establishment of power
plants using Renewable Energy .
(e.g. wind, hydel, biogas, solar power, geo thermal etc)
Validity: June 30, 2012.
Scheme for Financing Power Plants …Cont’d
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Tenor
Rate of Refinance
Banks’/ DFIs’ Spread
End Users’ Rate
Up-to 5 years 10.10% 2.50% 12.60%
Over 5 years and up-to 10 years
9.70% 3.00%
12.70%
Maximum grace period: Two Years
Tenor of loan is 5-10 years having markup rates of 12.40% to
12.50% as under:
Tenor & Pricing:
Scheme for Financing Power Plants …Cont’d
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Financing available through all Banks/DFIs (FIs).
Financing as per lending policies of FIs to cover credit risk
Financing to the extent of C&F Value & ex-factory price.
Annual limits sanctioned to FIs (except Scheme for Power
Plants)
Common Procedure for Availing Refinance from SBP
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Direct payment by FIs to supplier/manufacturer against LC/ILC
Repayment in equal quarterly/half yearly installments
Quarterly recovery of markup
Fixed markup rate for entire period of loan.
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Common Procedure for Availing Refinance from SBP …Cont’d
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Common Procedure for Availing Refinance from
SBP …Cont’d
Linkage of rates
Short Term Loans – T. Bills
Long Term Loans - PIBs
Yearly announcement of markup rates.
Fine in case of violation of the terms & conditions of the Scheme:
SBP reserve the right to recover the amount of refinance along-with fine at the rate of Paisa 60 per day per Rs 1000/- or part thereof.
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Documentation by FIs
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Common Procedure fro Availing Refinance from SBP …Cont’d
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Documentation by FIs
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Common Procedure fro Availing Refinance from SBP …Cont’d
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Structure & Basic Features
Partial Credit Guarantee Facility; coverage of 40% in credit loss.
Claim reimbursement on “Loss” categorization under relevant PRs.
Loss sharing on Principal amount only
PRs for SMEs Overdue by 1 year or more
PRs for Agri. Overdue beyond 2 years or more
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Basic Features(Cont..)
Maximum Loan Limit: Rs. 15 million for a Small Enterprises Rs. 2 million to Farmers.
Definition of Small Enterprise & Agri Farmer: Small Enterprises:
Farmers with upto Economic Landholding
Employees Upto 20
Sales Turnover Upto Rs. 75 million
Punjab and KPK Upto 50 Acres
Sindh and Baluchistan Upto 64 Acres
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Basic Features(Cont..)
Tenure: Short and Medium term loans of up to 3 years.
Pricing: Mark-up to be decided by PFIs In case of SBP Refinance, Mark-up under Refinance to prevail.
Basic Procedure: PFIs evaluate loan requests & extend facility to Eligible
Borrowers. Forward the cases to CGO for extension of guarantee facility The CGO issues letter for the guaranteed portfolio. SBP conducts inspection of Guaranteed portfolio & Re-imbursement
claims during its rutine inpection.
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Lending shall be made to fresh borrowers, as well as existing borrowers to meet their enhanced funding needs, who may not offer sufficient collateral to the bank.
Existing Portfolio is not eligible to be parked/re-booked under the Scheme, except when such loans are adjusted at their natural maturity.
Guarantee Facility may be used by a customer under refinance facility.
PFIs can extend more than 1 guaranteed loans to a single borrower within maximum loan limit of Rs 15 million for Small Enterprise and Rs 2 million for Agri. Borrower.
Necessary Clarifications: 29
SME Training Programs – for commercial banks
To equip banks’ officers with latest SME financing models/practices and tools, being used in SME finance across the globe.
More than 600 credit officers and mid level banking officials have been imparted training at different SME hubs across the country during last three years.
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Objective of the Cluster Survey
• To determine banking and financial needs of the target clusters.
• Design appropriate products (both asset & liability) to meet the needs.
• Help financial institutions to identify priority services of target clusters.
• Develop Product Program Manuals for the target sectors to be used by lending institutions.
• Facilitate SBP to bring changes in its regulatory framework for SME Financing if required.
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11 Surveys conducted in FY 2010-11
• 10 surveys Conducted in coordination with IFC
i. Sale, maintenance and repair of motor vehicles and motorcycles ii. Land Transport (Logistics & Passenger Traffic) iii. Education- Private sector schools and colleges iv. Health and Social Work – Private sector hospitals v. Textile Fabric vi. Glass & Ceramics Industry vii. Bakery & other confectionary products viii. Motor Vehicles and Trailers – Auto parts manufacturing ix. Meat, fruit, vegetables, oils & fats x. Grain mill products and animal feeds – Flour mills, Rice mills and
Ginning etc
• One Fan Cluster Gujrat/Gujranwala Survey through LUMS
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SME Cluster Survey – Future Plan for FY 2011-12
• 10 more Clusters surveys Proposed to be conducted i. Ceramics & Sanitary ware in Gujranwala/Gujrat, ii. Readymade Garments in Karachi & Lahore, iii. Gems & Jewelry Cluster Karachi/Lahore iv. Marble Cluster Karachi/Islamabad v. Sports Goods & Sportswear in Sialkot. vi. Whole Trade & Commission Trade vii. Spinning of Textile viii. Other Chemical products & Man-made Fibers ix. Paper & Paper Products x. Cutlery and Surgical Goods- Wazirabad/Sialkot
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Expected Benefits of SME Cluster Survey
SBP and Banks would be able to know specific issues faced by SMEs and take corrective measures accordingly.
Banks would be able to concentrate their resources in view of
dynamics of different SME clusters, their risk profile and financing needs to effectively serve specific clusters by offering customized banking products.
Banks would be able to develop SME-specific loan products and
program-based lending for SMEs by preparing risk profiles of SME customers in each cluster based on their peculiar cash flows, assets holding, market risks, socio-economic conditions, etc.
Resolve the problem of information asymmetries.
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Definition of SMEs
PRs define SME as an entity which fulfills all the following characteristics.
Trading Manufacturing* Services
No. of Employees
up to
50 250 250
Total Assets at cost
up to
Rs.50 M Rs.100 M Rs. 50 M
Total Sales
Turnover up to
Rs.300 M Rs.300 M Rs. 300 M
*Excluding land & Building An individual can also be treated as an SME
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