KARACHI: The State Bank of Pakistan (SBP) has defined annual revenue limits for small and medium enterprises (SMEs) to facilitate them for obtaining financing from banks in accordance with their sizes of sales turnover under the updated regulations.
The banking regulator has divided small enterprises into two categories in the updated Prudential Regulations for SMEs financing. The annual revenue of micro enterprises has been set at Rs30 million, annual revenue from Rs30 million to Rs150 million has been set for above micro enterprises.
The central bank retained annual sales turnover for medium-sized enterprises from Rs150 million to Rs800 million. A small enterprise or medium enterprise up to 5 years old will be considered as Start-up SE or start-up ME.
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According to the regulations, SMEs and startups should be an independent, for profit, and privately owned enterprise to qualify for banks financing.
A small enterprise (micro & above micro enterprises) can avail facilities (funded and non funded) of up to Rs100 million, and a medium enterprise (ME) up to Rs500 million from a single bank or from all banks/DFIs (Development Finance Institutions )/MFBs (Mircorfinance Bank).
Banks/DFIs may deduct the liquid assets (encashment value of bank deposits, certificates of deposit/investment, Pakistan Investment Bonds, Treasury Bills and National Saving Scheme Securities) held under their perfected lien for the purpose of calculation of per party exposure limit, according to Prudential Regulations.
Banks/DFIs shall either develop their own digital credit scoring models or develop partnerships with reputed third parties, fintechs etc. to determine credit score of the applicant SMEs. The models, inter alia, shall have the capacity to leverage the data like:
transactional and cash flow data,
bank account activity,
digital supply chain data, and
other verifiable alternate data sources.
Banks/DFIs can take clean exposure on SMEs (the cash flow-based facilities secured solely against personal guarantees) as determined by them based on the SME’s cash flows strength, financial condition, credit worthiness, credit score etc and risk appetite of the bank/DFI.
However, the clean exposure against an SME shall not exceed Rs50 million. Further, the clean exposure shall not include the clean consumer financing limits (Credit Card and Personal Loans etc.) allowed to a sponsor of the said SME under Prudential Regulations for Consumer Financing.
While considering any credit proposal (including renewal, enhancement and rescheduling/restructuring), banks/DFIs shall obtain latest credit information report on their prospective borrower(s) from Electronic Credit Information Bureau (e-CIB) of SBP or any Credit Information Bureau licensed/regulated by SBP. Banks/DFIs may take exposure against the SMEs with overdue portfolio based on their internal risk assessment policies; the reasons for allowing financing to such SMEs shall however be properly documented in the approval form, according to Prudential Regulations.
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Banks/DFIs shall establish an effective loan/financing monitoring mechanism, leveraging technology and digital tools where feasible, to monitor operating and financial performance of the SMEs. For the purpose, banks/DFIs may deploy/use digital or physical verification and monitoring tools, monitor operations in the SME account(s) with the financing bank digital stock reports etc, the regulations stated.
