1. SBP I NITIATIVES FOR P ROMOTION OF SME F INANCING IH& SME Finance Department State Bank of Pakistan, Karachi

2. 2 SME F INANCING T REND …. Borrowers is ‘000’Amount in Billions Dec-04Dec-05Dec-06Dec-07Dec-08Dec-09Dec-10Dec-11Dec-12Dec-13 Dec- 14 SME Outstanding 284.0 361.4 408.3 437.4 375.0 348.2 334.0 294.3 266.5 272.5 287.9 % Share in Total O/S 17.5%17.7%17.0%16.2%11.7%10.3%9.6%8.3%6.8%6.5%6.3% SME Borrowers 106161168185215212211168132 137 135 % Share in Total Borrowers 3.1%3.8%3.7%3.9%4.7%4.8%5.4%4.5%3.7%4.0%4.2% NPLs - SME Sector 30.142.13641.361.579.296.595.595.4 86.6 87.1 % Share in Total NPLs 16.7%24.3%22.6%20.5%20.6%18.6%19.4%16.0% 15.5%15.4% Note: Dec-08 and onwards is the aggregate of Banks & DFIs

3. T OTAL F INANCING -DFI S DFIs Total financing Amounts in Million Mar-14Jun-14Sep-14Dec-14 Pakistan Kuwait Investment Company Limited 28.85 57.39 52.15 43.63 Pak Libya Holding Company Limited 20.66 61.03 62.15 62.69 Pak Oman Investment Company Limited 60.38 84.76 95.19 99.64 Saudi Pak Industrial & Agricultural Investment Company Limited 70.71 69.92 72.64 77.77 House Building Finance Company Limited 79.43 127.56 128.33 130.90 Pak Brunei investment Company Limited 66.87 61.76 63.08 73.89 PAIR Investment Company Limited 126.35 47.96 47.30 44.63 Pak-China Investment Company Limited 71.05 66.23 65.20 65.58 3

4. Q UARTERLY SME F INANCING -DFI S DFIs SME Financing Amt in Millions Mar-14Jun-14Sep-14Dec-14 Pakistan Kuwait Investment Company Limited 0.730.550.510.47 Pak Libya Holding Company Limited 0.00 Pak Oman Investment Company Limited 0.611.071.021.06 Saudi Pak Industrial & Agricultural Investment Company Limited 0.000.37 House Building Finance Company Limited 1.130.00 Pak Brunei investment Company Limited 0.371.631.751.84 PAIR Investment Company Limited 0.00 Pak-China Investment Company Limited 1.650.00 4

5. SME F INANCING AS PERCENT OF TOTAL FINANCING DFIs SME Financing as percent of Total Financing Mar-14Jun-14Sep-14Dec-14 Pakistan Kuwait Investment Company Limited 3%1% Pak Libya Holding Company Limited 0% Pak Oman Investment Company Limited 1% Saudi Pak Industrial & Agricultural Investment Company Limited 0%1% 0% House Building Finance Company Limited 1%0% Pak Brunei investment Company Limited 1%3% 2% PAIR Investment Company Limited 0% Pak-China Investment Company Limited 2%0% 5

6. S HARE OF B ANKS IN SME F INANCING 6

7. 7 S TATE B ANK ’ S R OLE 1.Revision in SME PRs 2.Secured Transaction Framework 3.Implementing Supportive Financing Schemes for SMEs i.Credit Guarantee for Small & Rural Enterprises. ii.Refinancing schemes for SMEs iii.Mark up Subsidy and Guarantee Facility for the Rice Husking Mills in Sindh 4.PM Youth Business Loans Programme 5.Capacity Development Measures for Banks 6.Cluster studies of important SME clusters

8. 8 N EW I NITIATIVES IN P IPELINE  Introduction of Indicative Targets’ Regime  Launch of Financial Innovation Challenge Fund  Launch of Funding Facility for banks/DFIs for availing advisory services for diagnosis and then re-vamping SME Banking portfolio  Financial Literacy of SMEs  Data Enrichment – New PRs, District-wise  SME Finance details from banks through a questionnaire/survey  NPL Study  Indirect Exporters (EFS)  National Financial Inclusion Strategy

9. W HAT DFI S NEED TO DO IN ORDER TO CAPITALIZE ON THE OPPORTUNITY Strategy & Segmentation Dedicated SME banking strategy & business model Adopt specific market segmentation approaches. Effective branding and marketing of SME banking product and services. Product & Services Tailor existing corporate & retail banking products Build product programs Offer non-borrowing solutions. (Cash Management, payroll Management, payment collection, & trade finance solutions Sales & Delivery Introduce new SME Banking model SME specific branches in cluster areas. Use alternate delivery channels. (Internet banking, Mobile Banking) Advisory Services Provide Advisory Service to SMEs to aid and facilitate their growth. Organization and Systems Incorporate training into organizational framework to increase staff knowledge about SME Banking products. Risk Management Adopt better & more sophisticated methodologies for risk management. (behavioral scoring, credit scoring, cash flow based lending etc).