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SMEs are considered as driving force for the economy both in developing as well as in developed countries. In the given economic structure, no one can deny the importance of Small and Medium Enterprises. They are contributing in employment generation, GDP growth, poverty reduction and earning foreign exchange for the country by boosting its exports. Pakistani economy has good potential for the growth of SME sector but still they are unable to get the maximum benefit from this sector. There are multiple reasons behind this, including lack of good policies, current law and order situation as well as political instability in the country. One important problem faced by SMEs is unavailability of finances from the formal sources including banking channels. SBP and other specialized institutions like SME Bank, SMEDA is playing major role in the development of SME sector but still there is a lot of cushion available. Jodia Bazaar is considered as one of the major whole sale markets in Karachi. It consists of thousands of SMEs which includes whole sellers, retailers, importers, exporters, grain traders etc. Due to large potential in this market almost every bank has its presence in this market in the form of branch at Jodia Bazaar. If we look at the credit portfolio of these branches, we will come to know that the contribution of SME portfolio in their major credit portfolio is very small. We have conducted our research to know the factors due to which banks are reluctant to have exposure in the SME sector, especially in the Jodia Bazaar. Data have been collected from fifteen branches of banks located in Jodia Bazaar. Results are analyzed through Pie Charts. This research will be helpful for the Banking professionals, especially associated with credit departments and those who want to enhance the credit portfolio of the Branch in the Small and Medium Enterprises. Results show that Banks in Jodia Bazar are reluctant to take exposure in SME sector due to number of reasons, mainly due to unavailability of correct information, maintenance of proper accounts and availability of trained professionals hired by SMEs. Results also show that some banks have not developed specialized products for SMEs and they are not properly marketing the same.

An Overview of SME Sector and Examination of Banks Lending to SMEs: A Case Study of Jodia Bazaar - Karachi