Arooj Zulfiqar

In the bustling landscape of Pakistan's economy,small and medium-sized enterprises (SMEs) play a vital role, contributing significantly to job creation, innovation, and overall economic growth.However, despite their importance, the SMEs face a major challenge – access to finance, ex-chairman Board of Investment (BOI)Azfar Ahsan told WealthPK. Azfar said access to finance had become a critical bottleneck, inhibiting the full potential of the SMEs and impeding their ability to thrive. As per the estimates of the Small & Medium Enterprise Development Authority (SMEDA), there are more than five million SMEs in Pakistan. “The SMEs contribute 40% tothe GDP and 25% tothe overall exports. After agriculture, this sector provides employment to the highest percentage of working population and contributes to 78% of non-agriculture sector employment,” he said.

“Owing to various regulatory measures and facilitative role played by the State Bank of Pakistan (SBP), SME financing started rising from 2013. The financing reached Rs524 billion in December 2021 against Rs284 billion in December 2013. However, structural barriers still exist that impede bank lending to the SMEs,” said Azfar. “Policymakers and business leaders in Pakistan must act to support the SMEs and foster their expansion in order to tackle these issues. The SMEs need easier access to capital and the government must assist them by developing initiatives that offer financial support and lower the financing barriers. These actions will support competitiveness and growth,” he said. “In this regard, the State Bank of Pakistan (SBP) is introducing a Challenge Fund for SMEs (CFS) to support innovative solutions for SME banking.

This will concentrate on technologically-enhanced financial innovations. Grants from this fund would help banks create cutting-edge technical solutions to meet the banking demands of the SME sector,” he added. Digital SME banking includes a broad range of financial services accessed and delivered at affordable cost throughdigital channels. It can catalyse improvement in the living standards by providing affordable financing options and encouragingentrepreneurship. It is estimated that the market potential of Digital Finance Services in Pakistan will cross US$36 billion by 2025, providing 7% boost to the GDP, creating four million new jobs and resulting in US$ 263 billion new deposits.

Credit: INP-WealthPk