Collateral-Free SMEs Loan Introduced by the State Bank of Pakistan (SBP)

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State Bank of Pakistan (SBP) has introduced an innovative financing scheme that will facilitate collateral-free lending to Small and Medium Enterprises (SMEs). Under the program, 20 commercial banks participated out of which 8 were selected. The selection of these banks was done based on the bank’s financial strength and the number of SMEs they have previously served.

In Pakistan, SMEs access to bank financing remains low despite numerous policy initiatives. One of the biggest reasons is the lack of collateral and perceived risk associated with lending out to SMEs. In addition, a lack of track record related to SMEs also hinders their ability to reach out to formal financing options.

The SME Assan Finance was introduced by the SBP to solve the issue of SME- financing through innovative ways. The banks that are now entitled to provide collateral-free financing to SMEs include Habib Bank Ltd, United Bank Ltd, Allied Bank Ltd, Meezan Bank Ltd, Bank Alfalah Ltd, The Bank of Punjab, JS Bank Ltd and, The Bank of Khyber. These banks were selected through a transparent bidding process.

The SBP emphasizes that now the selected banks must undertake proper marketing and campaigning of this scheme. This will increase awareness regarding the scheme and help SMEs and small business owners utilize the benefits.

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IMARAT Institute of Policy Studies

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