By Hamid Mahmood ISLAMABAD, Nov 03 (INP-WealthPK): The government has come up with a plan to help small and medium-sized enterprises (SMEs) have easy access to bank financing to enhance their development prospects. This step is in line with the goal of allowing firms that cannot provide security or collateral to receive bank financing to be able to avail the bank facility. Provision of the easy bank refinancing facility is in recognition of the fact that SMEs have been playing an important role in decreasing the unemployment rate and alleviating poverty in Pakistan. Along with job formation, they have expressively contributed towards achieving balanced growth across regions. However, most small enterprises remain at an initial stage of development and fail to be promoted as medium enterprises due to their lower productivity and competition. Small and medium-sized businesses have also been hit hard by the Covid-19 epidemic with long-term consequences for SMEs, which account for around 90% of all companies in Pakistan. According to World Bank report 2020, Covid-19 has triggered a worldwide recession, with no country being able to withstand its negative effects. Due to its detrimental impact on Pakistan's economy, Asian Development Bank (ADB) predicted the lowest growth rate in 2020. The Covid-19 outbreak has hit Pakistan's SMEs hard, according to United Nations Development Programme's (UNDP 2020) response plan, which contains short-term strategies for dealing with the ongoing epidemic with government intervention in the form of financial support for SMEs. According to Small and Medium Enterprises Development Authority (Smeda), SMEs generate roughly 40% of the national GDP, but the epidemic has harmed the national economy, having a direct impact on the country's small and medium businesses. To mitigate the impact of the pandemic on the sector, the government launched SME Asaan Finance (SAAF) initiative in October 2021. Under the programme, SBP would provide commercial banks with three years of refinancing. The banks will repay after three years in 10 equal annual installments. The initiative is meant to provide clean financing for SMEs, i.e., lending without collateral. The important and appealing aspect of this programme is, depending on the size of the loans, the government would give risk coverage of 40 to 60% to the selected banks. This risk insurance will be 60% for small loans up to Rs4 million, 50% for midsize loans between Rs4 million and Rs7 million, and 40% for large loans between Rs7 million and Rs10 million. Only those banks that want to concentrate on lending to small businesses will be eligible for SBP refinancing. These banks will get SBP refinancing at 1% per annum and offer credit to SMEs at an end user rate of up to 9% per annum, which is highly competitive when compared to informal finance costs. Both Shariah-compliant Islamic and conventional financing options will be available. Easy access to capital is essential for the growth of the small and medium enterprises sector, especially in the critical situation under the Covid-19 era. The SBP scheme would meet SMEs' financing needs by addressing the fundamental structural flaws in SMEs lending, such as asymmetry of information, significant loan losses, lack of collateral, high delivery costs, and so on. The step will undoubtedly boost Pakistan's SME sector and the cottage industry. The central bank anticipates that this effort will enable sustainable development in SME finance.