SMEs, particularly small enterprises and suburban business units, are more inclined to avail Shariah compliant facilities instead of conventional financing due to religious factors and their understanding of conventional banking. These SMEs create a sizable market for selling Islamic banking products. Realizing the strength of this market, Islamic Banking Institutions (IBIs) have expanded their business operations. SBP has also assigned SME targets to IBIs. Islamic banking division of convention banks (IBDs) have also been advised to develop a detailed Islamic SME strategy for promotion of Islamic SME financing.
The proposal of offering long term refinance facility in Islamic mode has been approved by SBP’s Shariah Board and once this facility is approved by the competent authority of SBP, different forms of refinance facilities (as discussed above) will also be available in Islamic mode which will play a part in promoting financing to SMEs in Islamic modes. Further, Islamic SME financing is also a key component of capacity building and awareness creation programs.