Overview of the Scheme
The scheme offers a refinancing facility to banks that lend to Small and Medium Enterprises (SMEs) involved in modernizing their operations. For rice husking mills specifically in Sindh, the SEDF provides additional subsidies and guarantees to incentivize investment in this critical sector. These measures aim to reduce the financial burden on mill owners, enhance operational efficiency, and ultimately contribute to economic growth through increased agricultural output.
Mark-up Subsidy
Under the scheme, eligible borrowers benefit from a significantly reduced end-user mark-up rate of 2% per annum. This rate comprises various components:
- End User Rate: 2% per annum.
- Participating Financial Institutions’ Margin: 4.75% per annum, with SEDF subsidizing 2.75% of this margin.
- SBP’s Refinance Rate: 2% per annum, also borne by SEDF.
This subsidy effectively lowers the cost of borrowing for rice husking mills, making it more feasible for them to undertake modernization projects or establish new facilities.
Partial Guarantee
In addition to the mark-up subsidy, the scheme provides a partial credit guarantee cover of 30% to banks through SBP. This guarantee covers the outstanding principal amount of loans, mitigating credit risk for financial institutions and encouraging them to extend financing to eligible rice husking mill projects.
Eligibility Criteria
To qualify for financing under this scheme, rice husking mills in Sindh must meet the following criteria:
- Purpose: Financing is available for establishing new mills or undertaking Business, Modernization, and Replacement (BMR) activities.
- Loan Tenor: The maximum period for financing is 5 years, including a grace period of up to six months.
- Loan Size: Individual borrowers can access loans up to Rs 10 million, providing sufficient capital for operational upgrades or expansions.
Selection of Participating Financial Institutions (PFIs)
The SBP, in consultation with SEDF, selects 3-4 commercial banks to act as PFIs under the scheme. These banks are chosen based on their financial stability and extensive branch network within Sindh. Each selected PFI receives an allocated limit to disburse loans under the scheme, ensuring equitable distribution of financing across the region.
Procedure for Allocation of Limits
Upon selection, PFIs submit requests to SBP for guarantee-cum-subsidy limits within their existing refinance limits. SBP evaluates these requests based on eligibility criteria and fund availability from SEDF. Once approved, SBP communicates the allocated limits to PFIs, facilitating the disbursement of funds for qualified rice husking mill projects.
Establishment of Subsidy & Guarantee Fund
SEDF deposits subsidy and guarantee funds into a designated account maintained at SBP BSC (Bank), Karachi. These funds are managed under strict oversight by SBP’s Development Finance Support Department (DFSD), ensuring transparency and efficient utilization for the benefit of eligible borrowers.
Procedure for Banks to Avail the Facility
Banks interested in availing the facility must follow a structured process:
- Submit loan cases along with a request for guarantee and subsidy facilities to SEDF.
- Obtain a letter of comfort from SEDF to sanction the facility.
- Submit the request for refinance to SBP’s BSC office, incorporating the necessary documentation.
- Upon approval, banks forward requests for guarantee and subsidy facilities to DFSD through SBP BSC offices.
- DFSD evaluates these requests, verifies compliance with scheme criteria, and confirms the guarantee and subsidy facility within 7 working days.
Guarantee Facility
The scheme includes provisions for banks to lodge claims for the guaranteed amount if a loan is classified as a loss under the PRs for SME Financing. Claims must be submitted in the prescribed format, audited by the bank’s Internal Audit Department, and forwarded to DFSD via SBP BSC offices for reimbursement.
Faqs about Mark-up Subsidy and Guarantee Facility for Rice Husking Mills in Sindh
What is the Mark-up Subsidy and Guarantee Facility for Rice Husking Mills in Sindh?
The Mark-up Subsidy and Guarantee Facility is a specialized financing scheme launched by the State Bank of Pakistan (SBP) in collaboration with the Sindh Enterprise Development Fund (SEDF). It aims to support rice husking mills in Sindh by offering attractive subsidies and guarantees to facilitate their expansion, modernization, or establishment.
Who is eligible to apply for financing under SEDF scheme?
Rice husking mills operating in Sindh are eligible to apply for financing under this scheme. The purpose includes setting up new mills or undertaking Business, Modernization, and Replacement (BMR) activities.
What are the key financial benefits offered under this scheme?
Eligible borrowers benefit from a reduced end-user mark-up rate of 2% per annum, which includes subsidies covering part of the interest costs. Additionally, banks receive a partial credit guarantee of 30% from SBP, reducing their risk exposure when extending loans to rice husking mills.
How long can the financing period extend under this scheme?
The maximum financing period is 5 years, which includes a grace period of up to six months. This flexibility allows borrowers to manage their finances effectively during the initial stages of their projects.
Which financial institutions are participating in this scheme?
The scheme involves 3-4 commercial banks selected by SBP in consultation with SEDF to act as Participating Financial Institutions (PFIs). These banks are chosen based on their stability and extensive presence in Sindh.
What is the procedure for banks to avail the mark-up subsidy and guarantee facilities?
Banks interested in availing these facilities must submit loan cases and requests for guarantees and subsidies to SEDF. Upon approval, they proceed to submit a refinance request to SBP’s Banking Services Corporation (BSC) office, including necessary documentation.
How are guarantee claims processed under this scheme?
Banks can lodge claims for the guaranteed amount if a loan is classified as a loss under the PRs for SME Financing. Claims must be submitted in a prescribed format, audited internally, and forwarded to SBP’s Development Finance Support Department (DFSD) via BSC offices for reimbursement.
What are the security requirements for loans under this scheme?
The security requirements align with the credit policies of executing banks. Vehicles financed under any tier of this scheme serve as collateral, ensuring the safety of the lender’s investment.
Where can I find more detailed information about this scheme?
For detailed eligibility criteria, application procedures, and participating banks, interested stakeholders are encouraged to refer to SBP’s official communications and circulars related to this scheme. These resources provide comprehensive guidance on accessing financing for rice husking mills in Sindh.
How does this scheme contribute to agricultural development in Sindh?
The scheme aims to enhance agricultural productivity and modernize the rice husking sector in Sindh. By offering favorable financing terms and risk mitigation measures, it encourages investments in technology and operational improvements, ultimately supporting economic growth and sustainability in rural communities.
Conclusion
The Mark-up Subsidy and Guarantee Facility for Rice Husking Mills in Sindh represents a strategic initiative by SBP and SEDF to enhance agricultural infrastructure and support rural economic development. By providing favorable financing terms and risk mitigation measures, the scheme encourages investment in modern technologies and operational improvements within the rice husking sector. This collaborative effort underscores the government’s commitment to fostering sustainable growth and prosperity in Sindh’s agricultural communities.
For more detailed information on eligibility, application procedures, and participating banks, interested stakeholders are encouraged to refer to SBP’s official communications and circulars regarding this scheme. The Mark-up Subsidy and Guarantee Facility stands poised to catalyze positive change in Sindh’s agricultural landscape, paving the way for enhanced productivity and economic resilience.