SBP enhances scope of refinance facility for SMEs

KARACHI: The State Bank of Pakistan (SBP) decided to enhance the scope of its refinance facility for small and medium enterprises (SMEs) to cover a wide range of these businesses.

The decision was taken with a view to improving access to finance for the SMEs, said a circular issued by the State Bank on Thursday. Financing will be made available for the purchase of new imported and local plant and machinery for balancing, modernisation and replacement (BMR) of existing and setting up new units.

The sectors which are eligible for financing under the scheme include rice husking, cotton ginning, power looms, dairy and livestock, cutlery and stainless utensils, surgical instruments, marble and granite, engineering and electronics goods, fisheries, packaging and processing of fruits and vegetables, furniture, gems and jewellery, sports goods and agro-based industry. In addition, import and local purchase of new generators up to a maximum capacity of 500 KVA will also be eligible for financing under the scheme.

The maximum period of financing has been enhanced from seven years to 10 years. To incentivise banks and development financial institutions (DFIs) to provide financing facilities under the scheme, their spread has been enhanced. However, the rate for end-users will remain the same. For loans up to three years, the rate of refinance will be 5.50 per cent and the spread for banks and DFIs will be 2.5 per cent. End-user’s rate will be 8 per cent.

For loans taken for more than three years and up to five years, the rate of refinance will be 6.25 per cent and the spread for banks and DFIs will be 2.75 per cent. End-user’s rate will be 9 per cent. For loans for more than five years and up to 10 years, the rate of refinance will be seven per cent and the spread of banks and DFIs will be three per cent. End-users will be charged 10 per cent.