Dawn, Sunday, April 19th, 2015 SME sector emerges as major bank defaulter


KARACHI: The small and medium enterprises (SMEs) appeared major bank defaulters as the sector’s infection ratio at the end of December 2014 was 30.5 per cent, reported the State Bank in a recent report.

The government and the State Bank have been promoting the SMEs, but the sector has shown a high rate of infected loans.

Out of the total advances of Rs299.3 billion at the end of December 2014, the Non-Performing Loans (NPLs) rose to Rs91.2bn, making the sector highly risky for lenders.

The State Bank reported that overall corporate sector witnessed a slight improvement in the infection ratio which fell to 13pc at the end of 2014 from 13.4pc in 2013. The NPLs of the corporate sector increased to Rs429.1bn in December 2014, compared to Rs405bn in 2013.

Traditionally agriculture sector has been a poor performer as far as loans are concerned. In the last five years, the sector changed its face and banks are willing to lend more to this sector. However, infection ratio, as reported by the State Bank, slightly slipped to 12.4pc at the end of December, compared to 14pc at the end of December 2013.

Out of the total advances of Rs264bn, NPLs of the agriculture sector stood at Rs32.9bn, slightly up from Rs32.3bn at the end of December 2013.

Consumer sector showed the infection ratio of 11.6pc. Credit cards showed a dismal picture, as neither the advances improved nor the infection ratio. For the last several years, credit cards business showed a stalemate-like situation.

According to SBP report, advances of this sector, 18 months ago in September 2013 were Rs22.4bn and ended up with Rs22.8bn in December 2014.

The infection ratio improved from 16.3pc to 10.5pc in December 2013 and remained the same in December 2014.

The sector-wise analysis of the SBP report shows that the textile sector remained the biggest defaulter with highest NPLs of Rs198bn at the end of December 2014. The NPLs of the textile sector stood at Rs204.2bn.

However, the infection ratio of the sector slightly improved as it fell to 25pc in December 2014 as compared to 26.2pc in 2013. The textile is the biggest and strongest sector of the economy.

The other sound sector is the cement, but it also showed a big figure of defaults. The infection ratio of this sector at the end of 2014 was 19.5pc; however, the ratio improved since the infection ratio was 25.3pc last year.

Automobile and transport sector showed high infection ratio of 13.2pc, but it improved from the ratio of 17.2pc last year.

Similarly, electronics showed large improvements since the infection ratio of this sector fell to 16.7pc from 41.3pc a year back.

DataCheck Limited