KARACHI, Feb 28: The State Bank of Pakistan has asked banks to provide ample credit to the Small and Medium Enterprises (SME).

Speaking at the first meeting of the SME Credit Advisory Committee (SMECAC) on Thursday, SBP Governor Dr Shamshad Akhtar said that the central bank was determined to ensure that ample credit was available to the SME sector.

“We may impose some kind of allocation requirements, if banks do not venture into SME lending,” Dr Akhtar said.

She further stated that development of this sector would immensely contribute to employment generation and economic growth of the country.

The SBP governor directed setting up of a committee, having representation of SME heads from banks, SME department from State Bank and other relevant stakeholders, to deliberate on the issues associated with SMEs financing and suggest corrective measures.

She also directed the Pakistan Banks’ Association to revitalise its SME committee. Similarly, she directed the banks to immediately identify their SME heads as focal points so that efforts of various stakeholders could be well coordinated through the SME department of the State Bank.

“We need to have a coordinated approach, in consultation with the related government agencies and banks to resolve these issues,” she said.

The SBP governor urged the commercial banks to promote SMEs financing more aggressively.

She observed that it was in the interest of banks to diversify their credit portfolios with focus on SME financing.

For this purpose, banks need to launch innovative products to meet the needs of this important sector of economy, she added.

She said that the State Bank had established SMECAC to provide a forum for interaction with all stakeholders and deliberate on issues hindering the growth of SME financing.

She said that the SME sector offers huge potential which could be tapped through collective wisdom of all stakeholders.

Earlier, Mansoor H Siddiqui, Director, SME Department of the State Bank, briefed the participants about the scope and functions of SMECAC and initiatives taken by the central bank to promote SME finance.

He informed that as on Sept 30, 2007, total number of SME borrowers stood at 184,798 while total outstanding loans to them were to the tune of Rs409.86 billion.

The SME sector, which contributes about a third of total Gross Domestic Product, comprises 99 per cent of total 3.2 million business enterprises in the country.

Among these SMEs, 96.37 per cent employ one to five persons, 2.69 per cent have employment size of six to 10 persons, while only 0.95 per cent establishments have an employee base of 11-50 and above.

The total outreach of banks to SMEs has shown an annualised growth of around 11 per cent, but there was a huge scope for increase, given the potential size of the market.