BANKS’ LENDING PREFERENCES AND SME CREDIT IN PAKISTAN: EXPERIENCE AND WAY FORWARD

Abstract

This analysis builds on the evidence that Pakistani banks (as of June 2017) have sufficient financial resources to lend at levels that would be helpful for SMEs at large. Channelization of this excess banking liquidity to SMEs can lead to investment in innovative and lucrative projects to stimulate employment and growth in a number of important industries. However, banks are found reluctant to finance to SMEs owing the opacity issues and related risk. Mitigation od this problem nonetheless demand that banks should take leaps in adopting progressive/modern lending techniques (which bode well for the modern financing needs of SMEs) banks (without compromising on risk and return) can more adequately address SME credit constraints.