1. Capital Market for raising finance for SMEs
By:
Muhammad Abdullah
Head of special projects - PSX
March 16, 2017

2. 01 02 03 Presentation Plan Demand & Supply side Lending to SMEs
FINANCIAL ECOSYSTEM FOR SMEs IN PAKISTAN
Demand & Supply side
Lending to SMEs
Major obstacles for the SME financing 02
FUND RAISING BY SMEs THROUGH PSX
SME Board
Eligibility
How to get listed 03
SUPPORT & ASSISTANCE FROM THE GOVERNMENT
SME Fund
Tax Incentives

3. FINANCIAL ECOSYSTEM FOR SMEs IN PAKISTAN
Demand side
Supply side

4. 40% Contribution of SMEs in GDP
SMEs in Pakistan
3 million
SMEs (approx.)
40% Contribution of SMEs in GDP

5. 80% 20% SMEs in Pakistan SMEs are in trade and services
SMEs are involved in
manufacturing setups

6. Rs. 298 bln
is the lending to SMEs by banks in Pakistan (As on Jun 2016)
Rs. 1,500 bln*
total funding requirement for the SME sector in Pakistan
* as per UNIDO

7. neighboring/regional countries
Formal lending to SMEs
% of total lending by financial institutions to SMES
30%
neighboring/regional countries
7.3%
Pakistan

8. 3 million 164,700 SMEs access to Finance in Pakistan
is the approx. no. of SMEs in Pakistan
164,700
are SMEs’ borrowers in Pakistan as on 30 JUN 2016

9. Friends, Family and Private Lenders
Informal sources of lending to SMEs
Demand-Supply Gap … Rs. 1,500 bln Vs Rs. 300 bln
Availability Gap … 165 K SMEs Vs 3 m SMEs
Friends, Family and Private Lenders

10. Small businesses in the startup phase are entirely deprived of credit
MAJOR OBSTACLES FOR THE SME FINANCING
Collateral Based Lending
Lack of Awareness of Financial Products & Services
Isolation
Small businesses in the startup phase are entirely deprived of credit
Information Asymmetry Lack of documentation
1.5

11. FUND RAISING BY SMEs THROUGH PSX
eligibility
How to get listed
Benefits

12. SME Board
To increase access to equity finance for SMEs, a growing number of developing countries are creating specialized equity markets or boards, differentiated from the main exchange or board.
Pakistan Stock Exchange (PSX) has also developed such specialized segment for listing and trading of shares of SMEs and named it as the “SME Board”.
SMEs can raise capital from the capital market, against offer of shares, to fund their growth and expansion needs. To get funding, SMEs are required to ‘get listed’ on SME Board.

13. SME Definition
Public Company
SME
PUC 25 m to
200 m

14. Initial Offering 5 1m Initial subscribers at least five.
Each initial subscriber should at least buy Rs. 1 million shares.
The offer shall be made through fixed price method or book building method. 5 1m
offer

15. Getting Listed
Getting
Listed
Initial subscribers subscribe SME shares and SME gets listed on PSX’s SME Board
Once all queries are addressed, CAD submits the listing application to PSX’s Listing Committee for final approval
Consultant to the issue submits listing application to PSX’s Companies Affairs Department (CAD) 6 5 4 3 2
The SME can offer shares through fixed price method or through Book Building method 1
CAD performs due diligence process and discusses queries with SME / Consultant to the issue
SME appoints Consultant to the issue

16. Benefits of listing on PSX SME Board
Enhancement
of credibility
Easy access to capital
More beneficial than debt financing
Tax benefits
Option to migrate to the main board
Ease of Exit

17. SUPPORT & ASSISTANCE FROM THE GOVERNMENT
SME Fund
Tax incentives

18. SUPPORT & ASSISTANCE FROM GOVERNMENT
SME Fund
Introduction of KOSGEB style SME Fund to pay listing expenses of an SME.
Tax Incentives
Tax incentives for SMEs listed on PSX Board

19. Thank You