Islamic SME Financing

Prospective customers seeking Shariah-compliant SME financing through Allied Bank are required to meet the following minimum eligibility considerations. These benchmarks are indicative and do not guarantee loan approval. The bank reserves the right to modify these criteria on a case-by-case basis in accordance with its internal policies. Final approval remains at the sole discretion of Allied Bank.

1. Business History & Experience

• Minimum Business Age: 3 years

• Experience of Key Decision Maker: Minimum 3 years of relevant experience in the business sector

2. Purpose of Financing

• Financing must be used strictly for business purposes only

• The borrower must present a clear and precise fund utilization plan

3. Financial Benchmarks

4. Credit Bureau Status (e-CIB)

• Must reflect a clean credit history for the past 12 months

• No record of write-offs or legal disputes with any bank

5. Market Reputation & Verification Checks

6. Collateral Requirement

• Collateral needs may vary depending on the financing case

• The exact requirement is determined by the bank based on the customer’s risk profile and proposed financing structure

Financing limits are determined after a thorough assessment of your business’s financial needs. The maximum limit is subject to the applicable Prudential Regulations for Small and Medium Enterprises (SE & ME).

Profit is calculated based on the relevant KIBOR plus an agreed spread.

All applicable charges follow the bank’s prevailing Schedule of Charges (SOC).

Download the official form here:
Financing Application Form for SME (PDF)

Below is the list of documents typically required to process your financing request:

• Request letter for financing facilities

• Borrower’s Basic Fact Sheet (as prescribed by SBP) & Loan Application Form

• Copy of NTN

• CNIC(s) of all owners/partners/directors/key decision-makers

• Financials for the last 3 years

  • (Audited for Limited Liability Companies or where exposure > PKR 10 million)

• Company Profile

• List of Suppliers with credit terms

• List of Buyers with credit terms

• Receivables detail with ageing

• Details of offered collateral

• Any other documents/information requested by the bank

Note: This list is not exhaustive. Additional documentation may be required based on the business nature and financing needs.

Financing can be repaid either on the maturity date or prematurely, anytime within the finance period’s validity.

Any applicable late payment penalties and charges will be as per the bank’s Schedule of Charges (SOC).

Eligible companies can apply for Islamic SME financing at any Allied Bank branch across Pakistan. The approval process is outlined below:

• Step 1: Respective Branch Managers will forward your case to our regional business team, which will further liaise with you for any required information, etc.

• Step 2: The business team / relationship manager will provide a preliminary assessment of the request in view of the eligibility criteria. Subsequent to the bank’s satisfaction in all respects, the case will be put forward for further processing.

• Step 3: A decision on the proposed facility will be taken by the approving authority of the bank and advised accordingly to the applicant.

• Step 4: Subsequent to the approval of the request, the relevant business team / relationship manager will provide an offer letter for the applicant’s acceptance along with ancillary documents for limit authorization.

Q. How are SMEs (Small and Medium Enterprises) defined?

A Small Enterprise (SE) is defined as a business that meets both of the following criteria:

*Includes contract employees.

As per SBP’s Prudential Regulations for SMEs, an entity must meet both the employee and turnover criteria to be classified as a Medium Enterprise (ME).

• If one parameter meets ME criteria and the other meets SE criteria, the business will be categorized as a Medium Enterprise.

• If one parameter meets ME criteria and the other exceeds the upper limit for ME, the entity is considered a Commercial / Corporate Entity.

Q. What financial services can I avail from Allied Islamic Banking?

You may access a wide range of Shariah-compliant business solutions, including:

• Project Financing

• Leasing

• Working Capital Financing

Q. How much financing can I request from Allied Islamic Banking?

The financing amount depends on:

• SBP’s applicable Prudential Regulations

• The business needs and financial capacity of the applicant

Q. What does a debt-to-equity ratio of 60:40 mean?

This ratio signifies that:

• At least 40% of the total project cost must be financed by the borrower’s equity

• Up to 60% can be financed by the bank

Q. Does ABL Islamic Banking charge mark-up?

No. In compliance with Shariah principles, ABL Islamic Banking does not charge mark-up.

Instead, profit is charged through the sale of underlying assets to the applicant, based on the nature of the Islamic finance product requested.

Q. What is the applicable profit rate?

Profit is calculated using:

• KIBOR as a benchmark

• Plus a bank profit margin, which varies depending on the project’s expected cash flows

Note: The rate may vary from business to business.

Q. What kind of security is required by the bank?

Security requirements vary by case, but generally include:

• Mortgage of urban property

• Personal guarantees from the project sponsors

Q. Is the documentation process different from conventional banking?

The initial credit processing and customer profiling documents are generally similar in both systems.

However, Islamic banking transactional documents are based on trade contracts, in line with Shariah-compliant structures.

Q. How long does it take to process a loan application?

Loan processing time depends on:

• Completeness and accuracy of the information and documents submitted

• Nature and complexity of the financing request

• Perfection of security documentation

Delays usually occur due to incomplete or incorrect information provided by the borrower.

For further assistance or inquiries regarding Islamic SME Financing, please reach out to the designated contacts below:

To better understand the regulatory framework and Shariah compliance standards governing Islamic SME Financing, refer to the following resources:

• SBP Prudential Regulations for SMEs
  [Download PDF]

• SBP Shariah Compliance Framework for Islamic Banking
  [Download PDF]