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In a major move, the State Bank of Pakistan on Friday launched the Credit Guarantee Scheme for Small and Rural Enterprises and the Refinance Scheme for SMEs of NWFP, FATA and GB.
Governor, State Bank, Salim Raza launched the two schemes which are aimed at improving flow of credit to small and rural enterprises with greater emphasis on revitalisation of business activities in the troubled areas of NWFP, FATA and Gilgit-Baltistan (GB).
The refinance scheme is aimed at helping the terrorism-hit areas of NWFP which may help the almost destroyed economy of many areas of the province.
Under the refinance scheme, banks may provide short-term facilities up-to a maximum period of one year to SME units of all categories, of above areas to meet working capital requirements.
Rates of service charges will be determined on the basis of weighted average yield of six months treasury bills. These rates may be adjusted on monthly basis. Under the scheme, rate of refinance will be 6.5 per cent, banks spread is 2 per cent while the end-user will get money at 8.5 per cent.
Under the scheme for medium- and long-term facility, the banks may also provide loan for balancing modernisation and replacement and up-gradation of existing SME units or installation and setting-up of new SME units in NWFP, GB and FATA.
Medium- and long-term facilities under the scheme will be available for purchase and import of plant, machinery and equipment and investment in construction of factory, office, warehouse and allied infrastructure.
Financing facilities will be provided for a maximum period of seven years, including a grace period of six months. Rates of service charges will be determined on the basis of weighted average yields of PIBs of relevant tenors. These rates may be adjusted on six monthly basis.
For three years tenor, end users will get loan at 9.2 per cent, for over three years and up to five years the rate will be 9.7 per cent and for over five years and up to seven years, the rate will be 10.25 per cent.
Under the scheme, yearly targets or refinance limits would be allocated to each bank having branches in above areas.
Mr Raza said under the scheme, launched under the Financial Inclusion Programme (FIP) of SBP, the banks will provide short and medium term loans of up to three years for both working capital and medium-term capital needs of up to a maximum of Rs5 million. State Bank will share bona fide losses of lending banks to the extent of 60 per cent of financing to their eligible borrowers, he said and added that half of the resources under the scheme have been allocated for NWFP, FATA and Gilgit-Baltistan; whereas the other half will be used for priority clusters and areas of other parts of the country.
The State Bank on Friday issued two circulars regarding refinance and credit guarantee scheme.
According to the circular, the credit guarantee scheme would allow banks to develop a portfolio of fresh borrowers who are creditworthy, but cannot fit into their usual credit parameters, especially when collaterals are required. It would allow banks to assess small and rural enterprises on the basis of cash flows.
Further, the scheme should not be construed as a permanent source of support; rather an opportunity for the banks to make necessary alignments in strategic direction and meet SME financing needs on a sustainable basis.
The Scheme has been bifurcated into two segments-One for NWFP, FATA and Gilgit-Baltistan; whereas the other is reserved for priority clusters/areas of other parts of the country.
The eligible participating financial institutions (PFIs) will be allocated limits and the banks were advised to apply for status of PFIs after which limits will be allocated to select PFIs as per criteria outlined in the scheme.
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