The State Bank of Pakistan (SBP) has introduced a Modaraba-based Islamic refinance scheme for working capital financing of Small Enterprises and Low-End Medium Enterprises. Under this scheme, financing will be initially available to meet the working capital requirements of SME sectors, including Information Technology (IT), gems and jewelry, furniture, leather industry, surgical goods, fruits/vegetables and food processing & packaging, dates processing and Printing & packaging. The maximum period for which the financing under the scheme may be made will not be more than one (1) year.
The SBP will act as Rab-ul-Maal by providing Modaraba investment facility to the Participating Islamic Financial Institutions (PIFIs), in the form of investment in a PIFI''s general pool, and the PIFI will act as the Mudarib of general pool.
The SBP''s "Refinance Scheme for Working Capital financing of Small Enterprises and Low-End Medium Enterprises" was launched in 2017. However, a Shariah-compliant alternative of this scheme was not available. Therefore, in order to enhance the scope of this scheme, the SBP has introduced Modaraba-based Islamic refinance scheme for Working Capital Financing (IWCF) of Small Enterprises and Low-End Medium Enterprises. Small Enterprises (SEs) as defined in SBP''s Prudential Regulations (PRs) for SME financing are eligible under the scheme. Maximum financing limit for SEs is the same as defined in SBP''s PRs. Medium enterprises (MEs) with annual sales turnover of up to Rs 300 million are eligible under the scheme for a maximum financing of Rs 50 million.
The banks/DFIs may submit their requests for the status of Participating Islamic Financial Institution and they may also apply for allocation/ assignment of limit under the scheme. Banks and DFIs have been asked to submit requests within 30 days.
All Islamic Banking Institutions (IBIs) including full-fledged Islamic banks, Islamic banking subsidiaries and Islamic banking branches of conventional banks and all DFIs having authorized Islamic financing operations (IDFIs) under permission of SBP (collectively referred to as PIFIs) may participate in the scheme by submitting an application to the concerned department of SBP for granting the status of approved PIFI.
Limits will be allocated to individual PIFIs under the scheme. These limits will remain valid till finalization of the new limits by State Bank. The total sum disbursed during a financial year by the PIFI under the scheme will not exceed such assigned limit.
The PIFIs will not take more than 15 days in case of SEs and 25 days in case of MEs in evaluating an application for financing under the scheme from the date of receipt of complete information from the customer. Where the request is declined, the PIFI will explicitly explain the reason for rejecting the application to the prospective customer.
If at any time the general pool of a PIFI suffers a loss, it will be borne by all the depositors of the general pool, including the SBP, to the extent of their respective ratios of investments in the general pool.
The PIFI will be responsible for any loss incurred to SBP under this facility, if the said loss is subsequently proven to have been caused on account of negligence/misstatement and/or misrepresentation, on the part of PIFI, as determined by internal auditor, external auditor and/or SBP inspection team.
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