Pakistan: SBP Launches Schemes to Boost Credit Flow
Karachi, Pakistan , March, 20 2010 -
State Bank of Pakistan Governor Syed Salim Raza has launched two separate schemes aimed at enhancing the flow of credit to the Small and Rural Enterprises with greater emphasis on revitalization of business activities in the troubled areas of North West Frontier Province (NWFP), Federally Administered Tribal Area (FATA) and Gilgit-Baltistan (GB).
The new schemes included Credit Guarantee Scheme for Small and Rural Enterprises and Refinance Scheme for SMEs of NWFP, FATA and GB.
While unveiling the details of Credit Guarantee Scheme at a ceremony held at SBP Learning Resource Centre here on Friday, 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 Rs5.0 million at the markup rate of KIBOR (3 Months) + 300bps. State Bank will share bona fide losses of lending banks to the extent of 60 percent of financing to their eligible borrowers; he said and added that half of the resources under the scheme have been allocated for NWFP, FATA & Gilgit-Baltistan; whereas the other half will be used for priority clusters/areas of other parts of the country.
He said that the major objective of the scheme is to enhance the flow of credit to those Small and Rural Enterprises which are creditworthy but cannot offer adequate collateral to satisfy the normal requirements of banks. Due to banks’ perception about such customers being more risky, the State Bank will share banks’ losses on their lending under the scheme; he said and added that the scheme, apart from sharing credit risk of banks, will also contribute in lowering the transaction costs.
SBP Governor said that the initial seed money for the scheme is GBP 8.0 million, under the FIP funded by the UK’s Department for International Development (DFID), with the option of later being bolstered up through further allocation of funds from other sources including the Federal Government and international/bilateral agencies.