Karandaaz Pakistan and Meezan Bank Signed a Facility Agreement to Provide PKR 9 billion to Corporate Vendors and Distributors in Pakistan
Karandaaz Pakistan and Meezan Bank signed the Corporate Vendor and Distributor Finance Program agreement, a first-of-its-kind initiative aimed at providing growth capital for small businesses.Through this agreement, up to PKR 9 Billion in program-based term funding for capital investment and expansion working capital will be made available to small and mid-size vendors and distributors operating in organized economic supply chains in Pakistan.The program has been developed in response to the sharp decline in SME finance in Pakistan, from ~17% of total commercial bank lending in FY2008-9 to ~6% by FY2014-15. Access to term funding (long term cap-ex financing) is even more scarce for SMEs in Pakistan.“It is critical for broad based economic and employment growth in Pakistan that this credit contraction is reversed and brought in line with comparable international benchmarks (20-30% of banking assets). It is also crucial for commercial banks to develop viable credit models to lend to this vital agent of the economy”, stated Mr. Asad Azfar, Chief Investment Officer of Karandaaz Pakistan, while providing an overview of the Corporate Vendor and Distributor Finance Program at the ceremony. “The partnership with Meezan Bank is a first step in this direction and will enable apex Corporates to direct credit to vendors and distributors that are well-positioned for growth without assuming credit risk”, he added.Meezan Bank’s Deputy CEO and Executive Director, Mr. Ariful Islam expressed the bank’s utmost commitment to the partnership with Karandaaz Pakistan. He said the program has the potential to generate important strategic value for participating corporations by strengthening supply chains and distribution channels through providing access to finance; generating efficiency through greater economies of scale in supply chains and distribution channels; increasing corporate value by facilitating access to finance and banking relationships and reducing corporate balance sheet exposure.
“Meezan Bank, true to its commitment towards maintaining healthy bilateral relationships with majority of corporate customers in Pakistan, has not only proposed to broaden the vista of this program through the addition of distributors but has also recruited dedicated resources to ensure smooth operations and management of the program. Through this tripartite deal, the bank aims to contribute towards SME financing in Pakistan and cater to the growing void in cash flow lending for this sector,” he added.
Mr. Irfan Siddiqui, President and CEO of Meezan Bank, expressed the Bank’s utmost commitment to this partnership with Karandaaz Pakistan. He stated, “I am both delighted and humbled by the fact that Meezan Bank has been chosen by Karandaaz, a company that is sponsored by United Kingdom’s Department for International Development (DFID) and Bill & Melinda Gates Foundation, to partner with it to provide finance to the small and medium sized sector of the economy. We are committed to promoting this very important segment of the economy and our role is to provide risk capital and infrastructure to implement the Program successfully.”
The keynote address was delivered by Dr. Ishrat Husain, Chairman of the Board of Directors at Karandaaz Pakistan. While addressing the audience, he said,
Pakistan’s economy is highly dependable on the pace and productivity of SMEs. Ensuring access to finance by SMEs will allow them to modernize their production techniques, hire skilled human resources and invest in new equipment. They will be able to reposition themselves to earn more profits and expand their businesses. Furthermore, since SMEs are labor intensive and provide large scale employment, the rise in productivity and efficiency will make a significant contribution in accelerating employment generation, GDP growth and poverty reduction.
The United Kingdom’s Department for International Development (DFID) also stressed its commitment to financial inclusion in Pakistan. “Enhancing SME lending will make it easier for individuals including women and youth to expand their businesses and create more employment opportunities,” said Mr. Waqas ul Hasan, Senior Private Sector Development Adviser at DFID Pakistan. Speaking at the occasion, Dr. Louise Walker, Head of DFID’s Economic Growth Group said, “We strongly believe that the obstacles preventing businesses from growing and creating jobs need to be tackled urgently. I am therefore delighted that Meezan Bank and Karandaaz Pakistan have embarked on this important venture and look forward to seeing the outcomes of this partnership.”
About Meezan Bank
Meezan Bank is the 8th largest bank in Pakistan and the leading Islamic bank of the country. The Bank provides a comprehensive range of Islamic banking products and services through a retail banking network of more than 485 branches supported by a countrywide network of over 400 ATMs, Visa Debit cards, a 24/7 Call Center, Internet Banking and Mobile Banking facility.
Meezan Bank has consistently been recognized as the Best Islamic Bank in Pakistan by numerous local and international institutions, which is a testimony of the Bank’s commitment to excellence. These institutions include Islamic Finance News – Malaysia, Global Finance magazine – New York, Asset AAA – Hong Kong, Asiamoney – Hong Kong, The Banker – United Kingdom and CFA Association – Pakistan.
The JCR-VIS Credit Rating Company Limited, an affiliate of Japan Credit Rating Agency, Japan has reaffirmed the Bank’s long-term entity rating of AA (Double A) and short-term rating at A1+ (A One Plus) with stable outlook. The rating indicates sound performance indicators of the Bank. Meezan Bank is the only Islamic bank with AA credit rating in the Islamic banking industry in Pakistan.