Seminar On:

Challenges & Potentials For SMEs

(Karachi – 15th January 2002)

Working Session 3

Structuring, Delivering & Managing

Financial Assistance To SMEs
 A Presentation By:

Kaiser H. Naseem
President & CEO - SME Bank Ltd.

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 SME Bank Provides…
 FinancialAssistance
 Business Support Services
 Commercial Banking Services

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 Pakistan’s SMEs

 Create Employment Opportunities

 Contribute Towards Value Addition
 Generate Export Revenues
 Facilitate Resource Mobilization

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 Salient Features Of
SMEs In Pakistan

Mostly owner managed.

Mostly Equity based. Funding from
informal sources.
70% of failures derive from lack of
managerial skills and information.
Hard data on SMEs is still unavailable.

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 There is a GAP between
Pakistan’s SMEs and the
Formal Banking Sector

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 Bridging The Gap
 By Minimising ‘RISK’ through quality and diversified
lending.
 By Minimising ‘TRANSACTION COST’ through sector
specific and Program Lending schemes.
 By Making Access to Financing ‘Cost Effective’ and
‘Efficient’ by Developing innovative/customised financial
services/ products.
 By Giving Weightage to credibility appraisal in addition to
financial appraisal.

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 SME Lending Strategy
 Program Lending Schemes
 Leasing
 Syndication Operations
 SME Equity Fund for risk capital
 Corporate sponsored SME financing

Continued…

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 SME Lending Strategy - continued
 SME Lending through two-tier financial
packaging based on the principle of
matching funds
 Business Support Services Funds through
donor/govt. agencies.
 Commercial funds.

 Consortium Financing

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 SME Financing
 Financing Will Be Provided for Short and Medium
Term. Average Loan Period Will Be 4 Years
 Grace Period Will Range From One Month to 12
Months With Average of 6 Months.
 Normally, Installments Will Be Recovered on Monthly
Basis.
 Lending Rate Will Be Market Based. Rebate Will Be
Allowed on Timely Repayments - Expected Average
Rate of Mark-up 16% With 2% Rebate on Timely
Repayment.

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 Quality Assessment Measures

Operational
1- Risk Management
2- Robust Credit Review Procedures
3- Monitoring/Supervision of Lending
4- Assigning Targets To Staff
5- Incentives/Penalties System For Staff

continued…
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 Quality Assessment Measures - continued

Procedural
1- Sound selection of sectors, businesses and
proposals
2- Quick turn around time
3- Help to businessmen

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Tasks Ahead…

Making the SME sector BANKABLE:

- Allocating Value to Business Activities
- Asset Identification
- Building Capacities
Providing Business Support Services for:
- Preparation of Accounts
- Structuring Financial Statements
- Improving Processes
- Identifying Markets
- Preparation of Bankable Business Proposals
- Etc.

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 Reaching SMEs Through
Program Lending Schemes

 About The Schemes…

 Customized Financing Packages
 Developed through research & feedback from the
entrepreneurs
 Expedite Credit Delivery to sectors with large SME
presence
 Schemes available for carpet manufacturers,
dates processing, fan manufacturers, women
entrepreneurs, marine fisheries, etc.
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 Leasing
 Effective financing instrument for an
extensive outreach
 Eases collateral issues
 Asset-backed with fairly quick
application processing

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 SME Bank will also undertake
syndication & co-financing
operations

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 Joint Ventures / Leveraging
 With…

 PSEB (Pakistan Software Export Board)

 SMEDA (Small & Medium Enterprise
Development Authority)
 AKRSP (Agha Khan Rural Support
Program)
 LUMS (Lahore University Of

Management Sciences) and other

institutions

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 Recommendations

 Credit Enhancement Fund

 Conducive Regulatory / Legislative

Environment

 Adequate Business Support Services

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 THANK YOU

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