Pakistan has inaugurated the National Credit Guarantee Company Limited (NCGCL), the country’s first specialized credit guarantee institution to bolster financial support for Pakistan’s small and medium-sized enterprises (SMEs).
The launch event saw attendance from notable entities, including the British High Commission, the Association of Chartered Certified Accountants (ACCA), the State Bank of Pakistan, and the Ministry of Finance representatives. The NCGCL, a joint venture between the Ministry of Finance and Karandaaz, is designed to enhance financial accessibility for businesses, particularly those operating on a small and medium scale. This initiative is expected to widen the financial reach across various sectors, empowering businesses to grow and thrive.
Addressing the Finance Gap in SME Sector
Dr. Shamshad, the Minister for Finance, underscored the transformative impact of this initiative in her address. She highlighted the current state of private credit for SMEs in Pakistan, which is a mere 5.2 per cent, a decline from 7.7 per cent over the last five years. This figure is notably lower than the South Asian average of over 17 per cent. Dr Shamshad emphasized the critical role of the SME sector, which constitutes 90 per cent of formally registered businesses, contributes around 40 per cent to the GDP, and employs approximately 80 per cent of the non-agricultural labour force.
The minister pointed out the missed opportunities due to inadequate investment in the SME sector, a globally recognised sector for enhancing the competitiveness of countries and industries, generating employment and adding value. The launch of NCGCL represents a significant institutional reform to facilitate smoother capital investment paths for small businesses.
Dr. Shamshad elaborated on the expected impact of well-designed and effectively implemented credit guarantee schemes. Such schemes can lead to an average financial additionality of 30 to 35 per cent in the market, translating into economic benefits such as higher productivity, innovation, and job creation.
The credit guarantee company is set to develop various products tailored for the Pakistani market. These products are intended to cater to over 1.5 million SMEs, addressing a market volume exceeding PKR 3.7 trillion. Dr. Shamshad Akhtar emphasized that collaboration with financial institutions through NCGCL will ensure guaranteed access to credit, fostering economic growth and development in the business sector.
. This initiative aims to enhance financial support for over 1.5 million SMEs, contributing to the country's GDP and employment.){kind=link}