State Bank set to launch collateral-free loan scheme

Pakistan’s central bank is ready to initiate a scheme for financing of up to Rs10 million for the cottage industry without any collateral, revealed State Bank of Pakistan (SBP) Governor Dr Reza Baqir.

Speaking to high-ups of the Lahore Chamber of Commerce and Industry (LCCI), Baqir said that the government would give guarantee to banks against losses and would invite expressions of interest from the banks for inclusion in the scheme.

The central bank governor disclosed that end-user rate for small businesses and cottage industry would be 9% under the scheme, which otherwise got loans at 24%.

“To facilitate the growth of IT sector, particularly the startups, foreign exchange laws have been relaxed and made more business-friendly,” Baqir said, adding that foreign funding in the IT sector would be facilitated by easing the laws.

He added that banks had been directed to handle payment issues of IT companies.

“IT companies can now get web and digital services from abroad for up to $200,000 without approval of the State Bank. Previously, this limit was $10,000,” he pointed out.

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The governor added that the SBP had initiated various schemes like principal loan restructuring, the Temporary Economic Refinance Facility (TERF) and the refinance scheme for payment of salaries to support businesses during the Covid-19 pandemic.

He highlighted that more than 90% of beneficiaries of the scheme for restructuring of principal loans were small borrowers. “More than Rs600 billion worth of loans have been restructured,” he revealed. “Overall, the central bank provided a relief of more than Rs2 trillion to the business community through various schemes to help the economy to get on track,” Baqir said, adding that due to prudent policies of the government, the debt-to-GDP ratio did not increase during the pandemic, while in developed economies, it went up by 10-15%.

Shedding light on the TERF scheme, he told the businessmen that Rs436 billion in financing had been approved and most of the funds had been disbursed. Disbursement of the remaining amount was in the pipeline.

Published in The Express Tribune, June 8^th, 2021.

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