SBP launches SME Asaan Finance scheme State Bank of Pakistan

SBP launches SME Asaan Finance scheme

KARACHI: State Bank of Pakistan (SBP) on Monday launched the SME Asaan Finance scheme under which banks can lend up to Rs10 million.

The SBP said that enhancing access to SMEs is one of the priority areas of the central bank.

SMEs face a number of challenges in getting credit from banks; lack of collateral and high delivery costs are considered the biggest challenges.

In order to overcome these challenges in an innovative manner, SBP is now adopting a new approach whereby interested banks will bid for a subsidized facility with risk coverage.

Banks winning the bid will invest in human resource, technology and processes to successfully develop expertise, capacity and capability to cater to the SME finance market.

Accordingly, SBP is offering a ‘SME Asaan Finance’ (SAAF) scheme, available at Annexure A-i, wherein refinance and risk coverage both are being offered together.

Under the scheme, SBP will provide time bound refinancing for three years to the banks selected through a transparent bidding process. After three years, banks will repay the refinanced amount in ten equal yearly installments. The risk coverage will, however, be valid for a period of four years starting from launch of the scheme, in order to suitably cover loans extended during the third year of the scheme.

To accommodate the financing needs of faith sensitive borrowers, Shariah compliant alternate of the scheme i.e. ‘Islamic SME Asaan Finance’ (I-SAAF) has also been developed and is available at Annexure B-i.

All SMEs (new businesses as well as operative businesses) that are new borrowers of the participating banks are eligible. A single SME can, however, avail this facility from one bank only.

Maximum financing, under the scheme, to a single SME will be capped at PKR 10 million.

All types of loans i.e. term loans as well as working capital/running finance loans will be eligible.

Loans may be secured against personal guarantees of the borrowers.

Maximum tenor of the loan will be as per financing facility approved by the participating bank.

Mark-up rate for end user under the scheme will be of up to 9 percent per annum (p.a.). SBP will provide refinance to banks at 1 percent p.a. thereby, offering a spread of up to 8 percent p.a.

Under the scheme, Government of Pakistan will provide risk coverage of 40 percent to 60 percent on first loss portfolio basis on following portfolio categories:

Portfolio CategoryRisk Coverage
Loans of up to PKR 4 million60 percent
Loans exceeding PKR 4 million and up to PKR 7 million50 percent
Loans exceeding PKR 7 million and up to PKR 10 million40 percent

The risk sharing will be synchronized with the classification and provisioning criteria of SBP prescribed under Prudential Regulations for SME Financing to ensure that the profit & loss account of participating banks is not affected as far as loan infections remain below risk coverage levels.

The guarantee/risk sharing will be applicable on loans disbursed under this scheme during the first three years from the launch of the scheme. The validity of the guarantee/risk sharing facility will, however, come to an end after four years of the initiation of the scheme. The last payment under the risk sharing facility will be made for infections recognized at the end of last quarter of fourth year.

The risk coverage, at prescribed percentages, will be available separately for each portfolio category and appropriation of residual risk coverage from one portfolio category to another will not be permissible.

Limit on clean facility prescribed under Regulation SME R-4 of Prudential Regulations for SME financing will not be applicable on financing by banks under this scheme.

SBP invites interest from banks through Expression of interest (EOI) that desire to build their SME loan portfolio during the three-year validity period of the scheme. Banks offering the highest portfolio size and largest number of borrowers will be selected for participation in the scheme. Maximum number of participating banks under the scheme, selected from following four categories, based on the criteria specified by SBP, will be eight:-

Large Banks

Mid-sized Banks

Small Banks

Any category of banks in collaboration with Fintech.

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