SME Bank Limited was established pursuant to the Regional Development Finance Corporation (RDFC) and Small Business Finance Corporation (SBFC) Amalgamation and Conversion Ordinance 2001. The Bank obtained its business commencement certificate on April 16, 2005 which became effective from the date of its issue. The Bank is now a Scheduled Commercial Bank engaged in the business of banking with the primary objective to support and develop SME sector in Pakistan by providing necessary financial assistance and business support services on a sustainable basis. The Bank is operating through a network of 13 Commercial banking branches.

In terms of the provisions of the State Bank of Pakistan’ regulations the Banks are required to increase its paid-up capital (net of losses) to Rs 6 billion by 31.12.2009. The paid up capital of the Bank as of 30.09.2009 (net of losses) stands at Rs. 2.126 billion. State Bank has however exempted the Bank from minimum paid up capital requirement till its privatization.

SME Bank’s Head Offices presently situated at Islamabad. Government has decided to shift the Head Office of SME Bank to near a major business/commercial city. All major divisions are based at Islamabad except Treasury office which is situated at Karachi.
 

The Federal Government promulgated the Regional Development Finance Corporation (RDFC) and Small Business Finance Corporation (SBFC) (Amalgamation and Conversion) Ordinance, 2001 (the Ordinance 2001) setting forth the mechanism of amalgamation of defunct RDFC and SBFC. Both these entities were Development Financial Institutions (DFIs). Pursuant to this scheme entire assets and liabilities of defunct RDFC and SBFC as at December 31, 2001 were transferred to the Bank at fair value. These two institutions stand dissolved and ceased to exist effective January 01, 2002.

The Government of Pakistan (GoP) assisted by Asian Development Bank (ADB) is working on SME Sector Development Program (SME SDP). SME Bank is also part of said program and is under restructuring phase since 2004.
The major areas of restructuring of SME Bank include closure of recovery branches of defunct SBFC and RDFC, Human Resource audit, Training of employees, rationalization of staff, collection of loan portfolio of defunct RDFC and SBFC and building of Bank’s own/new portfolio.

The leasing division of SME Bank was separated in 2003 and SME Leasing Ltd a wholly owned subsidiary of Bank was launched in 2003 with a capital of Rs. 200.0 million. SME Leasing with its head office in Karachi is operating from 7 cities with 9 branches. During August 2006 SME Leasing increased its share capital by another Rs.100.0 million through public offering. SME Leasing assets stand at Rs. 1,979.9 million with equity of Rs. 410.6 million as at December 31, 2008. All the directors on its Board are nominees from SME Bank Out of total 7 directors 4 are form industry and 3 directors are the executives of the Bank.

SME Bank inherited a portfolio of Rs.14,485 million (principle & markup) from defunct RDFC & SFBC in 2002. Apart from recovering the old portfolio the Bank developed its own loan portfolio with specific focus in SME sector. As at September 30, 2009 the old portfolio stand at Rs. 9,001 million (principle & mark up) and SME portfolio stands at Rs. 2,483 million including mark up.

Disbursements made from January to September 2009 are Rs. 1,513 million and recoveries of Rs. 630 million were made. Recoveries include Rs. 494 from SME portfolio and Rs. 136 million from old portfolio. NPLs of SME portfolio stand at 20.64% as at September 30, 2009. Old portfolio is fully provided for. Government has decided to outsource the recovery of old portfolio of SBFC & RDFC to National Bank of Pakistan. This will be effective from 01.01.2010.

Bank’s total investments are Rs. 2,749 million. It includes Rs. 2,442 million in Govt securities like PIBs and T-Bills. The other investments include money market placements, CoIs and clean placements.