MICROCAPITAL BRIEF: Banks Finance Fewer Small and Medium-sized Enterprises in Pakistan

According to a report from the State Bank of Pakistan (SBP), the central banking authority of the country, bank financing of small and medium-sized enterprises (SMEs) declined by 4.5 percent from PKR 293 billion (USD 2.99 million) in June 2011 to PKR 248 billion (USD 2.54 billion) in June 2012. The number of borrowing SMEs decreased by 24 percent from approximately 194,000 to 147,000 during the year ending June 2012.

The report identified adverse macroeconomic conditions, energy shortages and a rise in non-performing loans as causes of the downturn. The report also noted that many small businesses had yet to recover from flooding that occurred in the Sindh and Punjab provinces in 2010 and 2011.

By Brendan Millan, Research Associate

About the State Bank of Pakistan: Established in 1948, the State Bank of Pakistan (SBP) is the central bank of the nation of Pakistan. Its primary functions include issuing notes, regulating the financial system, and serving as lender of the last resort for the banking sector. Its secondary functions include managing the public debt and foreign exchange.

Sources and Additional Resources:

[1] State Bank of Pakistan: “Development Finance Quarterly Review”, http://www.sbp.org.pk/sme/PDF/DFG/2012/DFG-Jun-12.pdf

MicroCapital.org story, January 4, 2013, “Mobile Bank Accounts in Pakistan Increase 25% to 1.8m over 3 Months”, https://www.microcapital.org/microcapital-brief-mobile-bank-accounts-in-pakistan-increase-25-to-1-8m-over-3-months/

MicroCapital.org story, June 27, 2012, “State Bank of Pakistan (SBP) Allows Microfinance Providers to Accept Funding from Non-Bank Sources”, https://www.microcapital.org/microcapital-brief-state-bank-of-pakistan-sbp-allows-microfinance-providers-to-accept-funding-from-non-bank-sources/

MicroCapital.org story, January 2, 2012, “State Bank of Pakistan Releases Five-Year ‘Microfinance Strategic Framework,’ Launches Financial Literacy Programme”, https://www.microcapital.org/microcapital-brief-state-bank-of-pakistan-releases-five-year-microfinance-strategic-framework-launches-financial-literacy-programme/

MicroCapital.org story, October 3, 2011, “State Bank of Pakistan (SBP) Reduces Provision Requirements for Microfinance Loans”, https://www.microcapital.org/microcapital-brief-state-bank-of-pakistan-sbp-reduces-provision-requirements-for-microfinance-loans/

MicroCapital.org story, August 22, 2011, “State Bank of Pakistan (SBP) Reports 13% Quarterly Decline in Microfinance Bank Deposits, Slow Recovery After 2010 Floods”, https://www.microcapital.org/microcapital-brief-state-bank-of-pakistan-sbp-reports-13-quarterly-decline-in-microfinance-bank-deposits-slow-recovery-after-2010-floods/

MicroCapital Universe Profile: State Bank of Pakistan (SBP), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=State+Bank+of+Pakistan

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