Small and medium enterprises: SBP urged to introduce long-term fixed rate capitalisation facility

According to Business Recorder, Syed Raza Hussain, president of the Federal B Area Association of Trade and Industry (FBAATI), has written to SBP Governor Jameel Ahmed proposing a new long-term financing window for small and medium enterprises. The letter points to acute financial stress across the industrial sector, with SMEs bearing the heaviest burden. Hussain said he recognises the State Bank's existing measures to broaden SME lending, but argued that high borrowing costs, tight liquidity and shrinking room for expansion call for a targeted mechanism.

The proposed facility would run through commercial banks and development finance institutions, giving eligible SMEs fixed-rate funding at 2 percent a year for productive capital spending. Eligible uses would include buying new machinery, replacing or modernising equipment, widening plants, adding production lines and upgrading technology. Hussain also asked for a long tenor with a suitable grace period so repayments match the working life of machinery and a business's cash generation.

He also called for a refinance or subsidised mechanism for participating banks, with risk coverage and simpler eligibility rules so that viable manufacturing units can benefit. Hussain argued the scheme would strengthen confidence in the SME sector and support industrial expansion, job creation and a revival of economic activity. The letter stresses investment and growth, not only working capital or temporary liquidity relief.