State Bank of Pakistan to the rescue - SME policy launched!
The "Asaani" or lack therefore will be vital for SME Assan Finance Scheme (SAAF)
The much awaited collateral free Small Medium Enterprise (SME) loan policy was launched yesterday. After a well-calibrated success of TERF financing for big industries, SBP has come up with a policy for the grass root borrowers. This has the potential. Shariah Compliant version is also available.
Key Features of the SME Asaan Finance (SAAF) policy:
- No collateral needed
- All SMEs (new & old) are eligible
- An SME can only avail it from one bank
- Rs 10m is the max limit
- Working Finance/ Term Loans available
- Tenure to be decided by the Bank
- Consumer Fixed Rate 9% (SBP will lend to Banks at 1%)
- Risk Sharing: Upto Rs 4m (60%), Rs 4-7m (50%), Rs 7-10m (100%)
- Risk Sharing valid for first 3 years of the scheme launch
SBP has invited Banks to participate in this process. Banks which commit highest size of the portfolio & number of borrowers will be selected for it. A spread of 8% along with risk-coverage is definitely salivating for the lenders.
Countries marred with social inequality, high borrowing costs, low minimum wages & economic uncertainty need such SME policies to grow economically. Many talented graduates are deprived of such financial services due to lack of collateral & end up in wage-trap for ever. Or eventually move out of the country, resulting in permanent brain drain (notwithstanding the USD remittances they send back).
The success - or lack thereof - of this policy will again depend on the push from the SBP and the government. The policy has to be "Asaan" not just in name but in delivery as well. Banks have no reason not to lend now but should use innovate ways of evaluating credit worthiness of the borrower.
SBP MUST GIVE TARGETS TO THE BANKS TO LEND VIA SME FINANCING.
Since it's a clean lending (without security), lenders may want to develop systems using borrowers spending habits, cards history, phone history, travel history, asset details, education level, criminal records, job experiences, third party references, tax records, driving challans, utility bills payment history etc to build a credit scoring model.
In many countries, lending is done with a click of a button in minutes. Know your borrower (KYB) is indeed an important task. Data availability will also help in lending practices.
Thus, SBP has done it's part (except giving minimum targets), ball is in the Banks' court. Government must aggressively push and market it as well. PM Housing Scheme is a success because of the personal interest taken by the SBP & PM House.
Need another push here. This is make or break for millions of Pakistanis. And their chance for them to test the entrepreneurial skills. If you have a job, it's time to create more for others.