Pakistan launches first-ever credit guarantee company for SMEs

ISLAMABAD: The Finance Ministry on Friday launched Pakistan’s first special credit guarantee company namely the National Credit Guarantee Company Limited (NCGCL), to provide financial assistance to small and medium-sized enterprises (SMEs) in the country.

The inauguration ceremony was attended by representatives from the British High Commission, Association of Chartered Certified Accountants (ACCP), State Bank of Pakistan, and the Ministry of Finance.

NCGCL, the joint venture of Ministry of Finance and Karandaaz, aims to enhance financial accessibility through special credit guarantee facilities, particularly focusing on expanding financial reach for businesses operating at the small and medium scale across the board.

Speaking on the occasion, Minister for Finance Dr Shamshad highlighted the significance of this revolutionary initiative.

She said that the private credit for SMEs in Pakistan stands at a mere 5.2 percent, declining from 7.7 percent in the last five years in the country.

The minister said the credit level was significantly lower compared to other South Asia, which has an average of over 17 percent, undoubtedly they do better on exports and they do better on competitiveness.

Dr Shamshad noted reality is that SMEs sector accounts 90 percent of formally registered businesses, contributes to around 40 percent of GDP and employees around 80 percent of non-agriculture labour forces, offering an opportunity to low income strata.

She was of the view that inadequate investment in SME sector, globally recognized to enhance competitiveness of countries and industries and value addition as well as employment generation, has hindered Pakistan’s sustainable growth and development.

The minister said launching of NCGCL was a far-reaching institutional reform that is being launched, adding the purpose of this transformative step was to facilitate smoother capital investment paths for small businesses.

She said, a well-designed and effectively implemented credit guarantee schemes can create an average 30 t0 35 percent financial additionality in the market which translates into economic additionality in terms of higher productivity and innovation, employment generation etc.

The minister said the credit guarantee company would create various products tailored for the Pakistani market, catering to over 1.5 million SMEs and a market volume exceeding PKR 3.7 trillion.

Dr Shamsad Akhtar emphasised that the collaboration with financial institutions through NCGCL will ensure a guaranteed access to credit in the market, fostering economic growth for businesses.