SBP Shortlists Eight banks for offering SME financing scheme

November 6, 2021

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Governor of the State Bank of Pakistan Dr Reza Baqir has said the banks have shown an excellent response to the innovative financial scheme designed by the government to provide unsecured loans to SMEs.
For the first time, SBP has proposed a comprehensive unsecured loan scheme for SMEs in the country. Among 20 competing banks
Eight banks in four categories were selected to participate in this SME Financing program based on the highest funding and the number of SME clients served.

These categories include, for example, Large banks, medium banks, small banks and banks in cooperation with fintech. Winning banks include: Habib Bank Limited, United Bank Limited, United Bank, Meezan Bank Limited, Bank Al Falah Limited, Bank Of
Punjab, JS Bank Limited and Bank OF Khyber. These banks were selected through an open bidding based on certain criteria. Recognizing the enthusiastic response from banks, Reza Baqir stressed the earliest possible start of the implementation of the plan in the banks. He also stressed the importance of an intensive awareness and marketing scheme so that small and medium-sized enterprises can reap the full benefits.

Access to finance for SMEs in Pakistan remains weak due to a number of factors such as lack of collateral and high risks from lack of experience. To solve these problems SBP
Take a pioneering approach by starting the small business Assan Finance, better known as SAAF, which refers to the unsecured nature of finance. SAAF was developed after extensive consultation with stakeholders. To implement this scheme, SBP decided that instead of recommending all banks to offer this product, only willing banks would be encouraged to participate in this initiative and develop Experience through a transparent process.

SAAF was launched in August 2021 and proposals from interested banks were solicited. Under SAAF, SBP provides banks with refinancing at 1% per annum (annually).
For lending to SMEs up to 9% per annum can be charged. The SAAF end-user price is attractive to SMEs compared to their usual informal finance costs.
Available margin helps banks make upfront investments in human resources, technology and operations to meet the financial needs of SMEs.

Under SAAF Program, Incentives are introduced for banks during the first three years of this program, and they are expected to become self-sufficient thereafter. In addition, under the SAAF, the Pakistani government provides risk protection up to 60%. Under the SAAF scheme, SMEs can benefit from unsecured financing of up to Rs. 10 million to meet long-term investment and short-term working capital requirements.
Governor Baqir also confirmed that a sharia-compliant version of the SAAF is also available.
SBP provided refinancing limits to eight winning banks for a period of three years. These banks are currently finalizing their preliminary plans for the successful implementation of the plan. Selected banks are expected to present their SAAF program soon through public information and marketing campaigns so that SME borrowers can contact any of the eight banks and request unsecured financing.