Definition and classification of an SME
SME sector in perspective
• Global perspective- importance, survival through economic cycles and growth opportunities
• SME banking business models in developed and emerging markets
• Trends in financing of SMEs
SME sector in Pakistan
• Role, importance and contribution of SMEs on the socio-economic front
• Conventional and emerging industry/sector concentrations
• Popular SME banking business models
• Challenges faced by SMEs in Pakistan
O Lack of proper infra-structure
O Regulatory complexities
O Shortage of skilled manpower
O Quality control problems
O Lack of entrepreneurial expertise
O Shortage / irregular availability of financing facilities
O Shortage of equity sources
O Inability to meet credit criteria / credit conditions
O Inadequate bargaining skills / options
O Lengthy documentation procedure
Financing of SMEs
• Understanding the SME
• Understanding the banking needs of SME customer- borrowing needs and other banking needs such as collection, payments, trade etc
• Difference in the nature and need of SME borrower and large corporate borrower
• Financial products geared towards SME customer- loan products and others
• Services and banking advice required by SMEs
• Analyzing financial ratios
• Analyzing the cash-flows of an SME
• Challenges in obtaining true financial statements from SMEs
O Proxy techniques
• Understanding the collateral/securities of an SME
• Use of scorecards – Importance and challenges
Credit risk management of SME loans
• Loan eligibility and evaluation criteria- ownership, financial analysis, understanding the borrowing cause etc
• Formulating a credit approval package for SMEs
• Loan disbursal management
• Risk management post-loan disbursal
• Difference in loan monitoring of SMEs and large corporate borrowers
• SBP lending guidelines and Prudential Regulations
• Early warning signals to arrest past-due portfolio
Making SME Financing a larger portion of bank lending
• Need for banks to focus on this segment
O Diversification of loan portfolio
O Boosting the industrialization process
O Reducing unemployment
O Growth of the export sector
O Improving the balance of payment situation
O Low loan loss ratio on SME bank deposits / banking services
• Challenges to banks in SME financing and the need to overcome them
• Need for marketing of SME banking products to customers
O Lack of awareness
O Lack of willingness
• Need for product development
O Products tailored based on the needs of SME
O Flexibility in product structure to absorb changing requirements of the SME
Strategies to promote SME financing and SME development
• Role of banks
• Role of State Bank of Pakistan
O Schemes
O Other initiatives
• Role of Government through specialized institutions
O SMEDA
O Provincial Small Industries Corporation (PSIC)
O SBFC and other DFIs
O Trade Development Authority of Pakistan (TDAP)
• Role of international agencies
O IFC/World Bank
O Asian Development Bank (ADB) etc
O DFID and other agencies
