SBP expands scheme to revive SMEs, agriculture sector

KARACHI: State Bank of Pakistan (SBP) has expanded the scope and extended the validity of the Refinance Scheme for Revival of Small and Medium Size Enterprises (SMEs) and agricultural activities in flood affected areas of the country.

According to SBP announcement here on Wednesday, this was done with a view to improve access to finance for SMEs and farmers in the flood affected areas.

The scheme will now also provide financing to the non-farm sector, said a circular of SME department issued here.

Earlier, the financing under the scheme was allowed to farm sector only. Likewise, SBP has also allowed banks/DFIs to repay the principal amount of refinance within 15 days of the due date(s), instead of 7 days as allowed earlier 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 31st October, 2011.

The primary objective of the scheme is revival of agriculture activities in flood affected areas. Given that the banks and DFIs would not provide more than 25 percent loans to the non-farm sector, out of limit sanctioned for agricultural financing under the scheme, the circular said.

The 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 of the scheme. They can also apply for enhancement of limits after utilization of their existing limits.

Further, other interested banks and DFIs, which have branches in the flood affected areas, may also apply to the Finance Department of SBP 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 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 and concessional mark-up rates through banks and DFIs for which a sum of Rs10 billion has been allocated.

However, banks and DFIs have shown a rather dismal performance in utilizing the allocated funds.

In view of this, the SBP 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 2, 2010.

Copyright APP (Associated Press of Pakistan), 2011