sme final project report

8/13/2019 Sme Final Project Report

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Resource Person

Sir Ahsan Naveed

Group Members:

M.Nawaz 100645-002 Sadiq Rehman Touqeer Hayyat Abdul Wahab Fawad khalid

Date : 20 th Dec, 2013

SME, MICROFINANCE & AGRICULTUR

University of Management & Technology


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EXECUTIVE SUMMARYThe purpose of this report is to fulfill partial requirements of ourcourse SME, MICROFINANCE & AGRISULTURE . We havecarried out our project in keeping with our text and have applied the

basic concepts and regulation studied. This project is related with thefunctions operations and lending products of the SME Bank Ltd.

Scope of Our ProjectWe have done limited work in this project regarding the lending

products of the SME Bank Ltd to the small businesses. And somefocus on the rules and regulation of the sme financing.


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HistoryThe SME Bank was formed and incorporated as a public limited company under the CompaniesOrdinance 1984. The Government of Pakistan is the major Shareholder of the bank. As part offinancial sector restructuring program of Government of Pakistan, Regional DevelopmentFinance Corporation (RDFC) and small Business Finance Corporation (SBFC) wereamalgamated into SME Bank Ltd effective January 1, 2002.

SME bank Ltd was established to exclusively cater to the needs of the SME sector. It was createdto address the needs of this niche market with specialized financial products and services thatwill help stimulate SME development and pro poor growth in the country.

Corporate VisionWe will be the leading institution for providing financial assistance for the development andsupport of Small and Medium Enterprises (SMEs) in Pakistan.

We will respond to the needs of Small and Medium Enterprises by providing them with thenecessary financial assistance and business support services in the form of medium to long termfunds.

We will, through support of the SME sector, contribute to the growth of local entrepreneurs,develop export markets and provide employment opportunities in the country.

Mission StatementTo support and develop the sme sector by providing necessary financial and technical assistanceon a sustainable basis.

To enable the sme sector to contribute to economic development through value addition andexports.

Promote entrepreneurship and create employment opportunities.


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Corporate Objectives

The objectives of the SME Bank are as follow:

To support, develop and promote Small & Medium Enterprises (SMEs) by providingthem the necessary technical and financial assistance.

To concentrate on value addition and export oriented SMEs

To enable SMEs to play a vital role in stimulating GDP growth, create job opportunitiesand reduce poverty.

Functions and OperationsSME Bank Ltd performs different types of functions and operations which are followings,

Basic Functions and Services Other Functions and Services

1) BASIC FUNCTIONS and SERVICES :

Basic functions are further divided into two types,

I. Extending loan facilities:-

SME Bank provides loan facility to any commercially viable business proposal merits SMEBanks support. It is Banks effort to assist and support enterprises that use indigenous rawmaterial, add value and are export oriented. Such enterprises are vital to our economy since theseare labor intensive and thus create employment opportunities.

II. Accepting deposits:-

SME Bank Ltd also provides deposit facilities to enhance the banking services (already provided by the bank to its customers through its network of 13 branches) and also for generation of cash

for lending.

2) OTHER FUNCTIONS and SERVICES:-

SME Bank also perform some other functions for the their valuable customers which arefollowings,


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Online Branch Banking:-

SME Bank is offering following online banking facilitates to its customers free of cost

Cash Deposit

Cash Withdrawal

Fund Transfer

Transfer Delivery

SME ATM Card Facility

Utility Bills Collection

Recovery of Loans

PRODUCTS OFFERED BY SME BANKThere are two types of products offered by SME bank:

1. SME Lending ProductsSME Bank Ltd provides different kinds of lending facilities which are followings,

i. RUNNING FINANCE

SME Bank provides running finance facility for working capital requirements e.g. purchase of stocks, raw material etc. To the existing Business for minimum of 2 yearsRunning Finance (RFF) Facility credit lines for 1 year.

Repayment monthly mark-up to be repaid or adjustable at the end of year or renewed.

Loan amount from 0.5 M to 75.0 for MEs and Loan amount from 0.5 to 15 million forSEs

Mark-up; 1 year KIBOR + 6% to be reviewed annually.

Security; mortgage of urban property (Max. financing of 70% of Forced Sale Value ofthe security & collateral}.

Cash/Near Cash Security with 10 to 20% margin, Hypothecation of movable assets.

NOTE * Amount benchmarked for SMEs, corporat e clients may go beyond the set limit.


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ii. MEDIUM TERM RUNNING FINANCEMedium Term Running Finance (MTRFF) Facility credit line for 3 years.

iii. TERM LOAN FOR WORKING CAPITAL TLWC credit line for 3 5 years Repayment monthly installments / quarterly to be repaid. Mark-up; 1 year KIBOR + 5% to be reviewed annually.

iv. TERM LOAN FOR FIXED ASSETS

For fixed assets investment e.g. plant and machinery/equipment, purchase &construction of land & building

Existing Business for minimum of 2 years TLFA credit line from 1 year to 5 years

Repayment 12 to 60 flexible installments Grace period; 3 12 months. Mark-up; 1 year KIBOR + 5% to be reviewed annually

v. FINANCING FACILITY FOR STORAGE OF AGRICULTURAL PRODUCE

For establishment, expansion, modernization and replacement of Steel/Metal/Concrete Silos,Warehouses and Cold Storage facilities for storing agricultural produce .

FFSAP scheme period from 3 year to 7 years Mark-up; 8% 10%.

vi. LEASING THROUGH ITS SUBSIDIARY

SM E Leasing is a Subsidiary of SME Bank Ltd whichis providing following products to small and medium size businesses.

o Leasingo Syndication Arrangement We also started to provide the advisory services for

SMEs for smooth operations of their businesses, syndication & funds arrangementto fulfill their financial requirements.

o SME Auto Plus A product for transport sector, does not cover only Buses /Coaches or Trolleys or Oil Tanker but also smaller vehicles like Bolan / Ravi /Shahzore Pickups or most of the light carrier vehicles.

o SME Medi Plus : A tailored product for doctors / hospitals for the medicalequipments

o Working Capital It's a cash financing facility for purchasing of raw materials,running & expansion of your business. The name of this product in SME Leasingis SME Cash Plus
http://www.smelease.com/products/index.html#leasinghttp://www.smelease.com/products/index.html#sahttp://www.smelease.com/products/sme_auto_plus.htmlhttp://www.smelease.com/products/sme_medi_plus.htmlhttp://www.smelease.com/products/sme_medi_plus.htmlhttp://www.smelease.com/products/sme_auto_plus.htmlhttp://www.smelease.com/products/index.html#sahttp://www.smelease.com/products/index.html#leasing


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o SME Cash Plus Ideally for small business entities in need of cash for its workingcapital requirements. Maximum limit of this facility is Rs. 3 Million for a singleclient.

2. Commercial Banking

SME Bank also accepting the deposits from public which includes followings

QATRA QATRA DARYA (Daily product basis: for Individuals and Business Concerns)

SME Rozana Izafa Aur Mahana Munafa

PLS Saving AccountCurrent Account

Mahaana Aamdan Account

Term Deposit Regular

Fixed Term Deposit Profit Payable on Maturity


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Customers prospectiveMr. Ali has running a pesticides & seeds shop from last three years in Pattoki. The total worth of

the business at present is Rs.3 million. Mr. Ali on the bases of last year sales of the maize seasonrealized that he needs Rs.1 million more to invest in his business for the purpose of earning more

profit, he has Rs0.4 million, but need Rs.0.6 million more for the purchase of further stock (for

the seed of maize and pesticides season is coming) only for one year. He wants to avail the

Running Finance facility for working capital from the SME bank. And he submitted the

following Documents along the loan application fee and form to the Ravi Branch of SME Bank

For initial assessment and documentary evidence verification for loan approval. Bank also

obtains a BBFS fill by Mr. Ali.

Documents Submitted

Completely filled Loan application form.

Copy of CNIC, photograph & his bank statement

Tax Returns & property documents offered as security

Detail & valuation of stock, plant & Machinery

Personal Guarantees*

Final accounts ( maintained on a registered)

COLLATERAL / SECURITY OFFERED FOR LOAN

Mortgages (Urban property)

Hypothecation of stocks


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Evaluation by the SME Bank LtdFirst of bank will evaluate Mr. Ali can he apply for loan on following bases,

Who can apply? Sole proprietors, partnership firms and all other legal entities

The business must exist for two years except for Financing Facility for Storage of

Agricultural Produce.

If you are (SE)

a business entity not employed more than 20 persons.

having annual sales turnover up to Rs.75 million,

Having assets not more than 20 million( excluding the cost of land and building)

If you are (ME)

Not a public limited company and does not employ more than 250 persons (in case of

manufacturing concern) and 50 persons (in case of trading / services concern)

A trading concern with total assets excluding land & building up to Rs. 50,000,000/-

A manufacturing concern with original value of total assets excluding land & building up

to Rs. 100,000,0000/-

A concern (trading services, manufacturing) with net sales not exceeding Rs.

300,000,000/- as per latest financial statements.

If you

are not maintaining accounts or record of your business

have fear of talking to bankers


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think that you can not avail finance facility

think you cannot manage finance facility

Evaluation by the SME Bank LtdSME Bank also evaluate Mr. Ali on the following bases,

RUNNING FINANCE LIMIT

In case of Running Finance working capital maximum Loan limit from 0.5 M to 75.0 M

is provided by the bank.

Amount benchmarked for SMEs, corporate clients may go beyond the set limit .

Borrower's Eligibility

The borrower should have a commercially viable business.

The business concern should generate monthly revenue sufficient enough to pay out

monthly mark up after meeting its expenses / operational expenditures or disclose any

other sources of income for paying its monthly markup.

Bank investigate the borrowers b usiness worth their Investment, Reserves and liabilities

Adequate Debt Equity ratio.

The business concern should fulfill the requirements of S.E.C.P regulations.

Collateral / Security

Hypothecation of stocks / additional security of Land and Building in case of working

capital.

Mortgage of urban property (Max. financing of 70% of Forced Sale Value of the security& collateral}.

Cash/Near Cash Security with 10 to 20% margin, Hypothecation of movable assets.


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Loan Approval or Disapproval afterEvaluationAfter evaluating Mr. Alis loan Application on the above bases SME Bank Extend the Loan to

the Mr. Ali. Because Mr. Alis Application is complete in all aspects and he also fulfills other

requirements like collateral / security, application for loan is also within the financing limits,

BBFS and e-CIB report is also satisfactory.

Question & Answers

SM E bank is a pri vate or Govern ment bank?

SME is commercial bank.

What are the function and operation of SME bank?

Commercial, leading and mobilizing deposits.

Clean exposur e/ loan li mit?

Clean facility Rs. 500,000

What i s the documentation fee of l oan appli cation or i s it r efu ndable or not?

Up to Rs. Two million will be 0.05% and above two million would be Rs. 15000 and it

would be non refundable.

What i s the procedure of obtain in g the loan?

First of all, they should be a business man, then bank verify their business worth, and if

satisfied with the worth then the Bank take their property registry or mortgage.

I n case of r ejection of l oan application , and why?

After 90 days of submission of documentation or provide incomplete or inappropriate

documents.


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What is the procedur e of customer complaints, how it can be resolved by the bank?

Managers officially itself investigate the case and verify that who is liable for this

negligence, if it would be branch end then they take the corrective measures and if in

case of customer end they reconcile the case.

Suggestions and recommendationsCooperation

Although still, there is cooperative environment but there is a need to further boost it up. And

cooperation among staff members, management, customer and other shareholder.

Promotion of Products

SME Bank promoted its launching of its ATM Card. But still there is need for continues

advertisement so that people unconsciously think about the bank.

New Schemes

The bank already has good schemes for both deposits and borrowers. But there is a need to

launch some more and attractive schemes for the people.

Low Employees turnover

Efforts should be made to reduce the employee turnover rate.

Rewards and promotion

More rewards and bonus schemes should be for management as well as for employees and

promotion should be based on performance of employees and no on favoritism.

Reduction in expenses

The bank has developed a policy for expenditure control policy, but it needs to be implemented

to reduce the expenses and increase the profitability of the bank.

Service Charges should be minimized.


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CONCLUSION

SME bank is a Organization which under control of Government and provided loans to the small

borrowers and the industries which are need financial support and this organization providedloans to the borrows and industries on easy terms and conditions as compare to the others

financial institutions working in the private sectors. This organization has a unique culture and it

is committed to provide customer satisfaction. They have created a very friendly and cooperative

atmosphere so that customers feel comfortable and deal freely with the bank. Bank has the

policies, which motivates the employees; the management of the bank is efficient.

SME bank Ltd, although is facing some problems at the moment. Some of them are its internal

managerial problems and other external factors, which are all outcome of the present economic

scenario of the country, which has seen its worse in last few years.

Second due to the privatization process and non surety of the job of employees is very

discouraging factors for the success of the organization. Turnover of employees is very high due

to the contractual job in this organization. Trained staff after joining leaves this organization to

private sectors and they are very helpful for the private sector. If they provide permanent jobs to

the staff members this problem is solved. Another thing is due to low salary to the staff as

compare to private sector the turnover is high. If bank come to solve these problems this will

become very successful.

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