FBATI urges SBP to cut long-term SME lending rate to 2%

The Federal B Area Association of Trade and Industry (FBATI) has asked the State Bank of Pakistan to reduce the interest rate on long-term loans for small and medium-sized enterprises (SMEs) to 2% a year, arguing that the cost of borrowing is holding back small industry.

FBATI president Raza Hussain made the demand in a letter to the SBP governor, in which the association urged the central bank to introduce a fixed-rate financing scheme for the revival of small industries. The letter said SMEs were facing persistent pressure from high interest rates, energy tariffs and rising taxes, and called on the governor to develop what it described as a comprehensive and sustainable financing plan specifically for small and medium-sized industries.

According to Raza Hussain, SMEs are currently provided business loans at a rate 2 percentage points above the Karachi Inter-bank Offered Rate (Kibor), which he said makes financing for small industries extremely expensive. The FBATI said costly bank loans had made it difficult for industrialists to purchase machinery and increase production.

On that basis, the association urged the SBP governor to provide small industries with financing at lower rates, similar to the facilities available to exporters. It also said the growing number of closures of small units was increasing unemployment.

The letter sets out the industry's position; the State Bank of Pakistan has not publicly responded to the request.