SME Banking
At Al Baraka Bank (Pakistan) Ltd., SME Group is engaged in providing all sorts of business solutions to Small and Medium Enterprises to meet their short and long-term business requirements, through various Shariah-compliant products and services giving them the satisfaction of halal banking services. We provide working capital finance through MURABAHA, SALAM, ISTISNA, and for long-term requirements; we offer DIMINISHING MUSHARAKA and IJARAH for the purchase of Plants, Machinery, and Vehicles. SME clients are also facilitated in handling their cross-border trade transactions through Import & Export.
With a wide array of services offered by Al Baraka Bank (Pakistan) Ltd., the SME Sector is also facilitated by Deposit Services, Trade Finance Services, Financing Services, Documentary Credit Services, Import & Export Finance products, SBP Refinance Schemes, Working Capital Finance, Purchase of Assets for trading or business promotion and Long Term Finance for the procurement of Business Assets.
Al Baraka Bank (Pakistan) Ltd. offers the following services to the Small & Medium Enterprises
- • SME Financing
- • SME Deposit Services
- • Agriculture Credit
Eligibility Criteria of the SME Sector
Small and Medium Enterprises have been divided into two different terms; Small Enterprises and Medium Enterprises. This step taken by the State Bank of Pakistan enables us to provide more concentrated and specific services to both sectors, considering their business financing requirement, manpower, and annual sales volume.
Small Enterprises Criteria:
- • Number of Employees: Up to 50
- • Annual Sales Volume: Up to Rs. 150 Million
- • Max Finance Permissible: Up to Rs. 25 Million
Medium Enterprises Criteria:
- • Number of Employee: 51 to 250 (for Manufacturing & Service concerns) and 51-100 (for Trading concern)
- • Annual Sales Volume: Rs. 150 to Rs. 800 Million
- • Maximum Finance permissible: Up to Rs. 200 Million from single or multiple banks
Product Details
Trade Related Services
- • L/C Sight
- • L/C Usance
- • Standby Guarantee
- • Performance Guarantee
- • Advance Mobilization Guarantee
Short Term Financing Services (Working Capital Finance)
Murabaha
It is a sale transaction of goods where the seller (Bank) discloses the cost and profit to its buyer at the time of execution of the sale. The Bank purchases the products from the market through its agent which can be the customer himself and subsequently sells it to him on the spot or deferred payment.
Istisna
It is a short-term finance facility in which the Bank orders the manufacturers to manufacture goods as per the agreed specifications of local or foreign buyers. The goods are then delivered to the bank, after the delivery the bank sells these goods locally or exports them through the customer acting as the bank’s agent.
Salam
This financing product caters to the working capital requirements of the customer by purchasing the finished goods from the customers. It is for those customers who sell their finished goods on a credit basis and need funds for the operational activities of the business including procurement of raw materials, wages, and other overheads. In this product, the bank purchases the finished goods from the customer on cash basis and sells the goods in the market through its agent, which may be a customer himself.
Tijarah
Tijarah is a working capital finance solution through the purchase of finished goods from the customer. It is for those customers who sell their finished goods on a credit basis and need funds for the operational activities of the business. These activities include procurement of raw materials, wages, and other overheads. In this product, the bank purchases the finished goods from the customer on cash basis and sells the goods in the market through its agent, which may be a customer himself.
Al Baraka Value Chain Financing
Al Baraka Value Chain Financing facility enables Small and Medium-sized enterprises to deal with liquidity constraints. Customers can avail financing to fulfill their working capital needs, i.e. financing against orders and assignment of receivables. As a result, they may provide the required quantity and quality of goods/services timely to their customers. ABPL shall extend credit facilities, preferably to those SMEs that are regular suppliers to corporate entities having satisfactory relationships with ABPL.
| Mode of financing | ABPL’s approved financing modes per the customer's business needs, e.g. Murabaha, Tijarah, Istisna, or Salam. |
|---|---|
| Customer Eligibility | • Should preferably be doing similar line of business for last 3 years • Clean payment history of individual / group concern. |
| Facility Tenor | As per the cash conversion cycle and payment arrangement. The maximum tenure for working capital lines is not to exceed 180 days or as per approval terms. |
Musawamah Spot
Musawamah Spot is a transaction where the bank procures the goods from the market through its agent and holds them under the supervision of the bank’s approved Mucaddam. After that, those goods are sold to customers in trenches or in full as per the requirement against cash/spot payments, unlike Murabaha where inventory is sold at once on a deferred payment basis and profit is fixed for the tenure.
This result in the tenure fixing of the profit for the entire tenure and the customer has to pay the profit only from the day of disbursement of financing till the day of sale of goods.
| Type of Product | Financing for Working Capital needs. |
|---|---|
| Tenors (minimum and maximum) | 180 days Max. |
| Target Customers | Corporate / CBSME. |
Medium & Long Term Financing Products
There are two major products to cater to the medium and long-term financing requirement of the customer.
Diminishing Musharakh
It is a medium to long-term financing solution, in which the customer and bank jointly purchase an asset including machinery, building, or vehicle, and possess a joint asset with the customer. The bank leases its share to the customer while the customer purchases the unit of ownership in the asset through periodic payment of installments. Upon the complete purchase of the ownership unit, the customer becomes the owner of the assets.
Ijarah
Ijarah is another popular Islamic Banking product for the medium to long-term financing requirements of the customers. In this product, Bank acquires an asset in the shape of machinery, equipment, or vehicles and then leases it to the customer for a fixed period.
SBP Refinancing Schemes
Islamic Refinance and Credit Guarantee Scheme for Women Entrepreneur (IRCGS-WE)
IRCGS-WE is an SBP refinance facility which is available at a discounted rate of 5% per annum up to PKR 5 million to meet the credit needs of women entrepreneurs. The financing shall only be available for women entrepreneurs and women-owned SMEs..
| Type of Customers | Women Entrepreneurs / Women owned SMEs |
| Modes of Financing | Murabaha / Diminishing Musharakah |
| Maximum Financing Amount | Rs. 5 million |
| Tenor | Maximum 5 years |
| Profit Rate | 5% p.a. |
Islamic Financing Scheme for Renewable Energy (IFRE)
State Bank of Pakistan launched Islamic Financing Scheme for Renewable Energy (IFRE) to provide financing for power projects / installation using renewable energy sources, e.g solar, wind, hydro, biogas, bio-fuels, bagasse cogeneration, and geothermal as fuel. This scheme caters financing for large renewable energy power projects as well as for small scale renewable energy solutions.
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Type of Customers |
Sponsors intending to set up renewable energy projects |
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Mode of Financing |
Preferred Mode: Murabaha Alternate Mode: Diminishing Musharaka |
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Maximum Financing |
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Tenor |
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Islamic Finance Facility for storage of Agriculture Produce (IFFSAP)
Islamic Finance Facility for storage of Agriculture Produce (IFFSAP) is a refinance scheme to develop agricultural produce marketing and enhance storage capacity. This facility is for Corporate / CBSME customers for establishment, expansion, balancing, modernization & replacement (BMR) of steel / Metal / Concrete Silos, Warehouses & Cold Storage facilities for storing agricultural produce.
| Type of Customers | Corporate / CBSME |
|---|---|
| Mode of Financing | Diminishing Musharakah |
| Maximum Financing Amount | Rs. 500 million per single project |
| Tenor | For corporate customer: maximum 7 years For SME customer: maximum 10 years |
SME Deposit Services
To promote and encourage the SME sector, Al Baraka Bank (Pakistan) Ltd is offering SME deposit services at all branches. The customers of the SME Sector can maintain their current accounts, saving accounts, and special saving accounts in any of the branches at their convenience.
