Sat. Jul 20th, 2024
SME Financing - Small and Medium Enterprises

SME Financing:

Small and medium enterprises (SMEs) are vital to the country’s GDP, petrol export revenue, and job creation. The employment creation of SMEs in Pakistan is directly related to economic development. Supporting the sector’s ability to achieve economic development goals such as promoting economic growth, job creation, income growth, and export growth, emphasizing the need for a systematic approach to realizing its full potential Gives.

In many countries of the world, including Pakistan, SMEs have been the mainstay of the economy. SMEs have proven to be a successful mechanism for poverty alleviation, especially in developing countries, as they provide opportunities for self-employment and income generation. Due to this unemployment ends in the country. Employment opportunities are provided to the people which strengthens the economy of the country.

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USING TECHNOLOGY TO PROMOTE FINANCING FOR SMALL BUSINESS

        SME Banking By leveraging technological advancements, banks may be able to offer their financial services to target customers at a lower cost.  By using technology, the bank can easily locate and investigate its customers, which will also reduce the cost of the bank. Technology in banking can be used in a wide variety of ways. Branchless banking, internet banking, and SMS alert system are being used nowadays. This has made the working process of the bank much faster, and the customers of the bank are getting many facilities

         Financial technology (FinTech) is an old concept that describes the use of technology to facilitate financial services. It strives to offer product availability and customer services through mobile and online platforms. Financial institutions are currently using financial technology (FinTech) to provide customer service to expand branchless banking in Pakistan.

ISLAMIC SMEs FINANCE

       Small and medium-sized enterprises, especially small businesses, prefer Sharia-compliant financial services over conventional banking due to religious reasons and their familiarity with banking practices. So that they don’t have to face any problems. In this sense, SMEs represent an important market for Islamic banking products. Recognizing the potential of this market, Islamic Banking Institutions (IBIs) have expanded their business activities

       The State Bank of Pakistan (SBP) has also designated Islamic Banking Institutions (IBIs) to support SMEs so that they can operate better. Furthermore, IBDs, the Islamic banking divisions of conventional banks, have been advised to develop a strategy to promote SME financing so that it can be scaled up.

You can also apply PM Youth Loan Scheme.

What BOP offers?

Bank of Punjab BOP provides complete banking solutions for small and medium businesses strictly adhering to Shariah laws.

Bank of Punjab envisions itself as a primary lender to SMEs across the country. Bank of Punjab caters to small and medium enterprises in the country, which are in accordance with Sharia law.

This service includes finance, trading, deposit-related services, online banking, etc.BOP has been successful in creating new employment opportunities in the country’s SME sector through aggressive customer relationship management, innovative product development, and lending practices. Bank of Punjab wants to lend to its customers in a fast and easy way so that the loan amount reaches the borrowers under the program effectively. A dedicated credit and commercial team is committed to serving their financial and non-financial needs.

SME Financing - Small and Medium Enterprises

SME Eligibility

State Bank of Pakistan has divided SMI into Small Enterprise and Medium Enterprise. So that they can be allowed to get loans and make it easier for them to do business.  A brief description of the distribution hierarchy is as follows:

  •  For Small Enterprises SE:

A small business should have at least 50 employees and an annual revenue of 150 million, so they can get a loan of up to 25 million.

  • For Medium Enterprises ME:

A medium-sized business should be a well-known business and not just someone’s small company

  In order to get a loan for this medium-sized business, the minimum number of employees in this company should be between 50 to 250 and its annual revenue should be between 150 million to 800 million. A loan of up to a million can be obtained.

If any company fulfills this parameter, then it can get a loan under the SME plan through the Bank of Punjab.

You Can Also Read: Wheat Production And Price in Pakistan

SME FINANCING IS AVAILABLE FOR THE FOLLOWING PURPOSE:

You can get loans from the Bank of Punjab’s SMEs program for the following:

  • To increase the business,
  • Purchase of raw materials and stock,
  •   Increase the commercial value,
  • Commercial value (imports, exports, and guarantees)
  •   To manage cash to run the day-to-day business

State Bank of Pakistan has offered to refinance to facilitate and support SMEs

TYPE OF PAYMENT & REGULARITY OF PAYMENT:

  • Long-term: monthly, quarterly, or semi-annual
  • Short term: As the client and the bank have agreed.
  • Late Payment Charity:

If you deposit your money after the due date. So you will be charged 24% per year on donations and the donations will be deposited in a charitable account like helping the poor.

SMEs Products List:

  1. Murabahah Financing:

The money required for regular business operations, purchasing raw materials or partially produced things, and obtaining finished goods for sale is referred to in this phrase.

  1. Trade-related facilities based on Murabahah :
  • LC Usance 
  • LC Sight
  1. Diminishing Musharakah Financing:

Rent and principal payments can be made every month, every three months, or every six months. The maximum term lending period for business clients will be 20 years. 

  1. Kafalah (Bank Guarantees) :

This refers to the payback of financial obligations incurred as a result of bid performance, mobilization, shipment, or other charges.

  1. Ijarah:

This is about importing machinery, equipment, or automobiles for corporate, commercial, small, and medium-sized enterprises, or retail consumers.

  1. Istisna:

Working capital is required.

  1. Murabahah / Musharakah :

Murabahah is a form of sale in which one person offers goods to another. The vendor must inform the buyer about the cost of the items, whether it is paid immediately or later, and include a profit margin in the selling price under this arrangement. Murabahah is only applicable to tangible assets.

SME CLIENT ELIGIBILITY CRITERIA:

  • The age of the company and the experience of the key decision maker: 3 Years (Minimum)
  • Purpose of Loan :
  •  The borrower must have a clear and unambiguous intention to use the funds.
  • The facility will only be available for business use.
  • e-CIB Status: Clean credit history for the last 12 months, no write-offs or litigation with any bank in the last.
  • Market Check: Everything is clear, no issue fund.
  • Supplier Checking: 
  • +ve feedback from clients.
  • +Positive feedback from buyers
  •  Buyer Checking:  No Negative feedback.
  • Collateral Requirement: 

             Yes. It was a case of requirement will Case Basis.

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