The State Bank of Pakistan (SBP) has extended validity of the refinance scheme for revival of SMEs and agricultural activities in areas severely affected by summer floods.
This has been done with a view to improving access to finance for SMEs and farmers in the targeted locations. The scheme would now also provide financing to the non-agriculture sector, said IH &SMEFD Circular No. 04 of May 25, 2011. Earlier, the financing under the scheme was allowed to farm sector only.
Likewise, the SBP has permitted banks and DFIs to repay the principal amount of refinance within 15 days of the due date(s), instead of seven days as previously allowed under the scheme, the circular said and added that the validity of the scheme has been extended up to November 30, 2012. Earlier, the validity of the scheme was October 31, 2011.
A major objective of the scheme is the revival of agriculture activities in flood affected areas, therefore, banks/DFIs would not provide more than 25 percent of loans to the non-agriculture sector out of the limit sanctioned for agricultural financing under the scheme, the circular said.
Refinance limits already sanctioned in favour of selected banks for agriculture and SMEs under the scheme for FY 2010-11 will continue to be available up to the expiry date prescribed in the scheme.
They can also apply for enhancement of limits after utilization of their existing limits. Further, other interested banks/DFIs, having branches in flood affected areas may also apply to IH&SME Finance Department for sanctioning of fresh limits under the Scheme separately for agriculture and SMEs, the circular added.
It may be recalled here that this scheme was introduced as part of the government’s policy for revival of agriculture activities and SBP relief measures for improving access to financing in flood affected areas. Under the scheme, financing is available at affordable mark-up rates through banks or DFIs for which a sum of Rs10 billion has been allocated.
However, banks/DFIs have shown a rather limited capacity in utilising the allocated funds. In view of this, the State Bank has decided to expand the scope of the scheme and made amendments accordingly in Para 1(a) (i), Para 5 (b) & (c) and 7 (b) of the Scheme, which was circulated through SMEFD Circular No.16 of November 02, 2010.