KARACHI – The State Bank has revised the Credit Guarantee Scheme (CGS) for Small and Rural Enterprises (SREs). According to SBP’s SMEFD Circular No 02, the scheme had been revised and improved in the light of the recommendations of the Technical Committee on Credit Guarantee represented by the central bank, UK’s Department for International Development and the Pakistan Banks Association (PBA).
The improvements in the scheme are expected to generate desired momentum, thereby ensuring maximum utilisation of the facility and increasing market penetration, the circular said. A number of amendments have been introduced in the CGS; firstly, the Guarantee coverage has been reduced from 60 to 40 percent. Additionally, the interest rate cap has been removed. The bifurcation into two components (I and II) and the restricted scope of clusters have been removed.
Eligibility requirement for lending to farmers has been increased from subsistence to economic landholding and the loan size has been increased from Rs 0.5 to Rs 2.0 million. The definition of small enterprises has been simplified, while the loan size has been increased from existing Rs 5.0 to Rs 15 million.
