The State Bank of Pakistan (SBP) has allowed startups to avail loans as “convertible debt” in order to facilitate them in raising financing from abroad. “Convertible debt is a type of financing which provides the option to convert loan into equity shares of the borrowing company, subject to certain terms and conditions,” said a statement issued by the central bank on Wednesday. “Before the latest instructions, entities were allowed to raise foreign currency loans from abroad within the parameters defined in Chapter 19 of Foreign Exchange Manual, but there was no specific category that provided the option of converting the loan into equity of the borrowing company.” The SBP expects that this initiative will help attract higher amount of foreign investment as it will provide another option to international investors to pour money into startups operating in Pakistan.
Published in The Express Tribune, May 27th, 2021.
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