KARACHI: To support the employment of workers in the face of economic challenges posed by Covid-19, the State Bank of Pakistan (SBP) has introduced a temporary refinance scheme for businesses to discourage them from laying off workers in the wake of the pandemic.
According to a notification issued by the SBP on Friday, the scheme, titled Refinance Scheme for Payment of Wages and Salaries to the Workers and Employees of Business Concerns, will be available to all businesses in Pakistan through commercial banks.
“It will cover all types of employees including permanent, contractual, daily wagers as well as outsourced workers,” the notification said.
The scheme will provide financing for wages and salaries’ expense, for three months from April to June 2020, for those businesses which do not lay off their employees in these three months.
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The notification added that although the mark-up on loans under the scheme is up to 5%, active taxpayers will be able to receive loans at a reduced rate of 4%.
The scheme has been designed especially to give preference to smaller businesses.
Businesses with three-month wage and salary expenses amounting to Rs200 million will be able to avail full amount of their expenses in financing.
On the other hand, businesses whose three-month wage and salary expenses exceed Rs500 million will be able to avail up to 50% of their expenses in financing.
“Businesses whose expenses fall between these two brackets will be able to avail up to 75% of their three-month salary and wage expenses,” it said.
According to the statement, banks would not charge any loan processing fee, credit limit fee or pre-payment penalties for loans under this scheme.
In addition to that, a grace period of six months would be allowed to the borrowers while repayment of the principal amount would be made in two years, it said.
Banks are liable to provide weekly reports to the SBP on the scheme and, in particular, the reasons for denying financing requests under the scheme.
According to the SBP, one of the main benefits of this scheme is that employers who retain workers on their payroll would be able to restore or increase production quickly once the situation normalises.
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“The scheme will ease liquidity constraints of the businesses and they can use their available financial resources to meet other working capital requirements,” the statement underlined.
It added that the SBP had taken a number of other measures in recent weeks to mitigate the impact of Covid-19 on Pakistan’s economy including an extension in the repayment of loan principal amount by one year.
In addition to this, the central bank has also offered concessional financing to hospitals for procurement of equipment to combat Covid-19.
“The SBP has been closely monitoring the credit conditions faced by the businesses and households and will take every possible measure to perform its due role throughout this disruption phase,” the statement added.