In a nutshell it was a daunting
task ahead to revamp the institution.
Mission statement: The first step taken was, to be very clear
about the business of SBFC. The new mission is:
"To be a premiere financial institution providing medium &
long-term, assistance (financial & technical) for the development of SMEs in Pakistan.
Thus contributing to the growth of local entrepreneurs, developing export markets and
providing employment opportunities".
Reorganization of SBFC
Strengthening recoveries: Recovery effort has been strengthened by offering remission
packages to the borrowers and better incentive packages for the recovery teams. The
results have shown much improvement. Focused efforts on recovery of stuck up loans, has
been made a priority feature in the corporation.
Rationalization of human resources/branch network: The total number
of branches has been reduced from 96 to 63. Some branches were mere cost centers burdening
SBFC. While rationalizing the branch network, it was made sure to have branches in areas
having concentration of SMEs. Modern SME branches will be well equipped to serve the SME
sector. In the new setup, there is head office, provincial offices and the branches.
Effort has been made to cut the overheads and have the facilities to the minimum.
Cases against corrupt people were moved and bold decisions were taken
to suspend them without getting influenced by external pressures. Stern actions were taken
to check irregularities that became norm in the past. All this sifted out most of the bad
elements in the corporation. Moreover, an attractive Voluntary Self-separation Scheme
(VSS) was offered to all the employees of the corporation. In the first phase, around 271
people opted for it. The second VSS is expected soon. This is being done to rationalize
the manpower, which will not be required in the future role of corporation. It is worth
mentioning that a very small number of people were hired (around 20) on professional
ground from the private sector. The emphasis is on training existing people and utilizing
the HR resources to the max.
Human resources/training: Separate HR department was setup with
a mission to upgrade the existing skills of employees and induce modern HR concepts into
SBFC. Training workshop for SBFC Branch Managers, a seminar on 'Change Management' and two
workshops on 'SME Financing' have so far been arranged in which SBFC employees were
instructed about SMEs. These training programs have been well received by the existing
employees and will alleviate their capabilities. In addition an SBFC newsletter has also
been started. This has just been another way of providing an open culture and challenging
the status quo.
Information technology/MIS: A separate IT department has been
set up with a view to disseminate IT knowledge/support services to SBFC employees. As a
first step, data-capturing exercise was organized to capture all the borrowers data and
bring it online. This was successfully completed recently. Now it will be easy to analyze
the data and generate required reports for the management, thus giving the real picture of
portfolio. Loan software has also been developed for the branches. The IT department was
also instrumental in developing the SBFC web site, which will be launched soon.
To introduce automation, a plan was made to procure the computers well
in advance. As of now, the hardware has been installed at the SBFC head office/provincial
offices and the networking will be in place shortly. The vision is to have all the offices
online.
Corporate image building: In order to build the corporate image
of SBFC it was decided to shift the offices to decent facilities, as the condition of the
current facilities do not relate to the new vision of SBFC. In this regard, Head Office,
Karachi and Lahore Provincial offices have already been shifted. The movement of other
provincial offices will be in the near future. The new facilities are provided with the
state of the art equipment and layout and effort is being done to provide a conducive and
worker friendly environment. From workstations to Pentium III machines, all is done to
raise the standard of SBFC.
Furthermore, the management is trying its best to have a progressive
and positive attitude towards the employees and clients of SBFC. This attitude is being
transferred to grass root level and is producing good results while developing the image
of SBFC in the eyes of general public.
Strategic alliances are another way, which the management choose to
upgrade SBFCs image. One such alliance was done with Askari Leasing (country's largest
leasing company) to jointly make efforts for the development and support of Small &
Medium Enterprisers. Talks are underway to form more alliances with other institutions for
co-financing activities.
Introduction of treasury function: A treasury division of SBFC
has been set up in Karachi which is responsible for the management of cash and surplus
funds. It is being operated as a profit center. The division is investing funds in
government securities and placing funds with other financial institutions. It is also
responsible to structure non-funded transactions and manage the liquidity of the
corporation. By introducing the treasury function, SBFC is emerging as a major player in
the interbank money market.
Legal department: An in house legal consultant was hired from a
reputed firm. This not only helped in speeding the inquiries against corrupt officials,
but also in taking concrete steps against the limitations in the Act. As SBFC has outlined
an aggressive strategy for itself to finance SMEs in the country, certain amendments in
its original act are required. It is felt that the limitation imposed by the Act in 1975,
is not conducive to the market demands. Under its new mandate, SBFC will extend financial
assistance to projects up to a cost of Rs.100 million.
Establishment of risk Management Division: Establishment of Risk
Management Division (RMD) was yet another step to revitalize SBFC operations. RMD was made
responsible for developing prudent lending practices for SBFC's future lending. This new
division tackles issues like a comprehensive credit manual, SME specific application forms
and the requisite documentation. Hiring for RMD/Credit was done on professional grounds.
The emphasis has been mainly on internal hiring and training. The RMD took SBFC to a level
where now it's ready for fresh lending. Multiple lending programmes have already been
developed and individual loan proposals from all over the country are being entertained.
Financial products:
Fisheries: SBFC is a pioneer among DFIs to provide financial assistance to this sector
in recent times. Since the exports of Pakistani fish to European countries declined after
restrictions by the EU due to un-hygienic preservation and handling methods, the Karachi
Fisheries Harbor Authority strictly enforced regulations to modify the fish holds of the
traditional trawlers. After a detailed study, SBFC has already announced a package for the
fishermen to:
a) Modify fish holds
b) Meet working capital needs
The financing package has been formally announced and published in the
newspapers. SBFC's objective is to assist the sector through providing loans to poor
fishermen. The loan for modification of boats is up to Rs. 400,000/-. To facilitate the
fishermen, revolving credit limits are allowed to meet working capital needs.
Dates: Dates are grown in over 40 countries of the world and
Pakistan now ranks as the fifth largest exporter. Its forex earnings have been US$ 25-30
million annually, while currently exporting approx. 65,000 tons or 11% of total annual
production of 600,000 tons. Since there is ample scope of boosting the exports of dates,
SBFC has identified this sector to earn valuable foreign exchange. In recent years, value
has been added through packaging, processing, preservatives paste syrup, chocolate etc.
Currently we have been facing losses in the quality of our dates. Its packaging too, does
not meet international standards. Thus to assist the sector, SBFC targeted the area where
the losses can significantly be reduced, and foreign exchange earnings are increased. Two
areas have been identified.
a) The stage when unripened date is ripened through
costly acid unhygienic/traditional methods which should be replaced by simplified,
hygienic and efficient procedures.
b) Processing and packaging of dates attracting the
hygienic customers in international markets.
The date growers, growers-cum processors, contractors and the
processors would be eligible for SBFC loan up to Rs. 1,500,000/-. The loan would be
utilized either to purchase machinery/equipment for washing/drying, processing &
packaging of dates or to meet working capital requirements, constructing storage
facilities and developing new date palm orchids through pollination and propagation will
also receive SBFC assistance.
Information Technology: I.T. is one of those sectors that have
tremendous potential and commercial viability for investment opportunities. Realizing the
importance of this sector, SBFC has launched a plan to provide financial assistance to
those professionals who want to establish I.T. educational institutions, software
development houses, Internet service providers, cyber cafes and IT hardware manufacturing
activities.
Other sectors: SBFC financing programmes for other sectors like
CNG, gems and precious stones, cotton ginning, and textile apparel, marble processing,
etc. are in the process of study and preparation and shall be announced shortly. Besides
programme lending, SBFC is ready to finance any viable/profitable project. Currently SBFC
can lend upto Rs. 1.5 million for a project whose project cost excluding the value of land
does not exceed Rs. 5.0 million.
Future vision: Small Business Finance Corporation is working to
be the SME friendly institution of the future. Acting on its mission statement, SBFC in
future will not only provide financial assistance but also technical assistance to its
clients. The specialists for providing various technical services have already been placed
on SBFC panel.
Client friendly attitude: The future SBFC will be a client
friendly lending institution. Every thing from minimum loan documentation to the in house
sector specialists and to a range of service providers will be geared to meet/satisfy the
client. The emphasis will not only be to meet the financial needs of the clients, but
actually to become part of his/her business in solving the problems and making it
profitable.
Financial assistance:
Individual projects: For financial assistance to individual projects, SBFC will
finance:
1) Up to 50% of the total project cost (TPC) of
small businesses, defined as businesses with TPC of up to Rs. 20 million; and
2) Up to 30% of the total project cost (TPC) of the
medium sized businesses, with TPC of up to Rs. 100 million.
Syndicate financing: SBFC is envisaging cooperation and
strategic alliances with other financial institutions to co-finance SME projects. The
objective for these arrangements are:
a) To act as a catalyst to attract other financiers to
promote and support the SME sector for the economic revival of the country;
b) To bring SME projects into the arena of formal
financial sector and economic systems;
c) To increase the credibility of SMEs for future bank
borrowings;
d) To enable SBFC to share and disseminate resources
and information for the mutual benefit and growth of the organization;
e) To diversify financing risks;
f) To diversify and increase credit portfolio.
Sectoral lending: In a new role of SBFC, Sectoral Lending will
be done based on 'Program Lending' approach. Emphasis is being given to those sectors that
boost the country's exports. The sectors identified for SBFC's financial assistance are
textile apparels, cotton ginning, oil & gas, information technology, fisheries, dates,
light engineering etc. After a detailed study of each sector, financial packages are being
prepared. Also, an 'IT specific Venture Capital Fund' will be formed, proposals for which
have already been received.
Technical assistance: SBFC is targeting its policies at
improving the structure and international competitiveness of SMEs so as to keep ahead of
changes and challenges in the new era in which they are expected to play a leading role.
Efforts are being made to strengthen the management of the existing SMEs and to promote
the start-up of new, technologically viable SMEs to tackle the ever-intensifying
international pressure.
SBFC recognizes the fact that providing financial assistance alone to
the SME sector is meaningless, as a large number of SMEs require considerable hand holding
before they can develop the capacity to borrow. Such hand holding ranges from SMEs having
the ability to access information on markets and acquire technology to upgrade their
processes to preparing a bankable business proposal. SBFC has now on its panel,
specialists in the fields of Product Identification/Innovation, Product Positioning, Human
Resources, Engineering, Training, Quality Assurance, Production Processes, Procurement,
Accounting/Auditing, Information Systems, Marketing/Research, and General Management. It
is this hand holding, which will be available to the SBFC clients on a very nominal fees
on need basis. Thus weíll be offering 'Packaged Solutions' to our clients.
It is truly believed that the management has come a long way in less
than a year, and although one can expect lot of challenges in the future yet there has
been a movement in the right direction. Once a platform for SME financing is in place,
this will make the credit available to SMEs, which have been the victim of borrowing from
informal sector at exorbitant rates.
A massive restructuring exercise, carried out during the last few
months in the organizational structure and human resource development, internal controls
and procedures, process re-engineering and financial product development and accounting
has resulted in a complete turn-around in the institution, which would hopefully be
reflected in its future performance.
