SBP raises cheaper financing limit to Rs2.5b

Decision aimed at giving much-needed boost to exports

KARACHI: In an effort to give a much-needed boost to exports, the State Bank of Pakistan (SBP) has raised the maximum limit of cheaper financing for the import and purchase of plant and machinery by 66.6% to Rs2.5 billion for each export-oriented project.

“With a view to further promoting investment in export-oriented projects, it has been decided to increase the maximum financing limit for a single project under LTFF (Long Term Financing Facility) and ILTFF (Islamic Long Term Financing Facility) from Rs1.5 billion to Rs2.5 billion,” the SBP said in a notification issued on Thursday.

In April 2018, the then Pakistan Muslim League-Nawaz government reduced the mark-up rate to 5% from 11.4% on the LTFF in the budget for the current fiscal year 2019. Small and medium-sized enterprises (SMEs) are also eligible to apply for the financing under both the schemes.

“The SBP has been offering long-term refinance facility to promote export-oriented industries since January 2008 under the ‘Long Term Financing Facility for plant and machinery’ through commercial banks and development finance institutions,” stated the central bank.



The facility provided the exporters with necessary financing for the adoption of new technologies and modernisation of plant and machinery in line with international standards, it said.

The maximum period for which financing under the facility can be availed will not be more than 10 years including a maximum grace period of two years. Where financing is provided for a period of up to five years, the grace period will not be more than one year, according to the consolidated and updated instructions on the LTFF for Plant and Machinery dated June 28, 2018.

Export-oriented projects would be required to meet the minimum export target prescribed under the LTFF (annual exports equivalent to $5 million or at least 50% of the company’s sales constituting exports, whichever is lower) within a maximum period of four years, it said.

Earlier, the central bank let the rupee depreciate by a staggering 34% to Rs141.39 against the US dollar in an effort to boost sluggish exports.

Financing for women entrepreneurs

Apart from this, the central bank has also extended a cheaper SME financing facility to women entrepreneurs throughout Pakistan at a maximum 5% mark-up rate, according to another notification of the State Bank.

The central bank said, “In order to encourage SME financing for women entrepreneurs across the country, the scope of the scheme (Refinance and Credit Guarantee Scheme for Women Entrepreneurs) has been extended to all districts of the country with immediate effect.” Earlier, the scheme was introduced in the name of “Refinance and Credit Guarantee Scheme for Women Entrepreneurs in Underserved Areas.”

“Rate of mark-up for end-user under the facility will be up to 5% per annum. The SBP will provide refinance at 0% mark-up,” the central bank said.

Published in The Express Tribune, April 26^th, 2019.

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