KARACHI – In a move aimed at bolstering small and medium-sized enterprises (SMEs) in Pakistan, the State Bank of Pakistan (SBP) unveiled the SME Asaan Finance scheme on Monday, allowing banks to lend up to Rs10 million to qualifying businesses.
Recognizing the challenges faced by SMEs in accessing credit, with issues such as a lack of collateral and high delivery costs, the SBP has prioritized enhancing SME access to financial resources. The new initiative adopts an innovative approach, allowing interested banks to bid for a subsidized facility with risk coverage.
Under the ‘SME Asaan Finance’ (SAAF) scheme, the SBP will provide time-bound refinancing for three years to banks selected through a transparent bidding process. Winning banks will then invest in human resources, technology, and processes to build the expertise, capacity, and capability required to cater to the SME finance market.
The scheme offers a dual benefit of refinancing and risk coverage. The SBP will provide refinancing to selected banks for three years, with repayment scheduled over ten equal yearly installments after this period. Additionally, risk coverage will be in effect for four years from the scheme’s launch, ensuring adequate coverage for loans extended during the third year.
In response to the financing needs of faith-sensitive borrowers, the SBP has also introduced an Islamic alternative, the ‘Islamic SME Asaan Finance’ (I-SAAF) scheme.
All SMEs, whether new or existing businesses, are eligible to participate if they are new borrowers with participating banks. However, each SME can only avail this facility from one bank. The maximum financing limit for a single SME under the scheme is capped at PKR 10 million, and all types of loans, including term loans and working capital/running finance loans, are eligible.
Loans may be secured against personal guarantees of the borrowers, with the maximum tenor of the loan determined by the financing facility approved by the participating bank. The markup rate for end-users under the scheme is set at up to 9 percent per annum, with the SBP providing refinancing to banks at 1 percent per annum, resulting in a spread of up to 8 percent per annum.
The Government of Pakistan will provide risk coverage of 40 percent to 60 percent on a first-loss portfolio basis, with risk sharing synchronized with the classification and provisioning criteria of the SBP. The risk coverage is applicable to loans disbursed under the scheme during the first three years, with the guarantee/risk sharing facility ending after four years.
The SBP is inviting expressions of interest (EOI) from banks interested in building their SME loan portfolios during the scheme’s three-year validity period. Selection will be based on criteria specified by the SBP, with a maximum of eight participating banks selected from large banks, mid-sized banks, small banks, and any category of banks in collaboration with Fintech. The banks offering the highest portfolio size and the largest number of borrowers will be chosen for participation in the scheme.
