KARACHI: The State Bank of Pakistan (SBP) on Friday launched two separate schemes for increasing the flow of credit to small and rural enterprises with greater emphasis on revitalisation of business activities in troubled areas of NWFP, FATA and Gilgit-Baltistan (GB).
“Importance of SME sector in our rural economy may further be seen from the fact that it provides livelihood to 66 per cent of our population”, said SBP Governor Salim Raza here at the launching ceremony of the Credit Guarantee Scheme for Small and Rural Enterprises.
Under the credit guarantee scheme, banks will provide short and medium term loans of up to three years for both working and medium-term capital needs of up to a maximum of Rs5 million at mark-up rate of 3-month KIBOR plus 300bps, said the SBP Governor.
The SBP will share losses of lending banks to extent of 60 percent of financing, he said. Half of the resources under the scheme have been allocated for NWFP, FATA and Gilgit-Baltistan whereas the rest will be used for priority areas of other parts of the country, he added.
He said the major objective of the scheme was to enhance the flow of credit to those small and rural enterprises, which were creditworthy but cannot offer adequate collateral to satisfy normal requirements of the banks.
Under the other refinance scheme, banks will provide short-term facilities for working capital requirements and long-term facilities for SMEs of NWFP, FATA and Gilgit-Baltistan, Governor SBP said.
The rate of service charges will be linked with weighted average yields of 6 months Treasury Bills (TBs) and Pakistan Investment Bonds (PIBs). Currently, the end user’s rate will be 8.50 per cent, 9.20 per cent, 9.70 per cent and 10.25 per cent for up-to 1, 3, 5 and 7 year financing respectively. The scheme will remain valid up to December 31, 2012.
He said SME and agriculture sectors were the largest sources of employment in the country. “Within these areas lie Pakistan’s best projects for increased economic growth, reduction in income disparities, poverty alleviation and the promotion of innovation and entrepreneurship.”
The SME sector’s share in export earnings and GDP stands at 25 per cent and 30 per cent respectively, he said and added that agriculture employed 42 per cent of labour force, contribute around 22 per cent to GDP and 60 per cent to exports directly or indirectly.
He pointed out these important sectors had not been able to avail due share in financing from formal sources specially the banking sector.
Recent data reflects that share of SME finance and agri-finance in banks’ total financing is 10 per cent and 4.8 per cent respectively.
Moreover, as per latest survey, only 7 per cent of total SMEs use formal financial institutions for meeting their funding needs thus posing a big challenge to banks, requiring them to enhance the level of credit to the neglected sectors of the economy, he added.
The SBP Governor said the credit disbursement situation had further aggravated the SME and agriculture sectors of NWFP, FATA and Gilgit-Baltistan, where social and economic infrastructure had been seriously damaged, thus increasing the risk of doing business manifold.
Source: http://www.thenews.com.pk/daily_detail.asp?id=229946
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