SBP revises Credit Guarantee Scheme

Targets maximum utilization and high market penetration.

KARACHI: The State Bank of Pakistan (SBP) has revised the Credit Guarantee Scheme for small and rural enterprises, which is aimed at ensuring maximum utilisation of the facility and increasing market penetration.

The scheme has been revised in the light of recommendations of the technical committee on credit guarantee, represented by the State Bank of Pakistan, UK’s Department for International Development (DFID) and Pakistan Banks Association (PBA), said a circular issued to banks on Monday.

According to the recommendations, guarantee coverage has been reduced from 60 per cent to 40 per cent and bifurcation into two components (I & II) and the restricted scope of clusters have been removed. The eligibility requirement for lending to farmers has also been increased from subsistence to economic landholding and the loan size has been increased from Rs0.5 million to Rs2 million. Additionally, loan size for small enterprises has been increased from existing Rs5 million to Rs15 million.

Banks have been advised to apply for allocation of fresh credit guarantee limits, as per criteria outlined in the scheme and standard operating procedures, placed on SBP website, before February 24.

Published in The Express Tribune, February 15^th, 2011.