Scope and Eligibility
The refinance scheme is specifically designed to meet the working capital needs of SMEs in the following sectors:
- Information Technology (IT)
- Gems and Jewelry
- Furniture
- Leather Industry
- Surgical Goods
- Fruits, Vegetables, and Food Processing & Packaging
- Dates Processing
- Printing & Packaging
Eligible Enterprises
- Small Enterprises (SEs): All small enterprises as defined in SBP’s Prudential Regulations (PRs) are eligible under this scheme.
- Medium Enterprises (MEs): Medium enterprises with annual sales of up to Rs 300 million are also eligible.
Financing Limit
- For Small Enterprises (SEs): The maximum financing limit aligns with the limits defined in SBP’s PRs for SME financing.
- For Medium Enterprises (MEs): The maximum financing limit is Rs 50 million.
Participating financial institutions (PFIs) will determine the borrowing limits for eligible borrowers based on their credit requirements, cash flows, repayment capacity, and risk profile.
Financing Tenor
The maximum loan tenor under this scheme is one year.
Participating Financial Institutions (PFIs)
All commercial banks and Development Finance Institutions (DFIs) can participate in this scheme.
Rate of Mark-up for SME Sectors
- End User Rate: Up to 6% per annum.
- PFIs Rate: SBP will provide refinance to PFIs at 2% per annum, allowing a spread of up to 4% per annum for PFIs.
Allocation of Refinance Limits
- SBP will allocate limits to PFIs based on requests received from them. These limits will be reviewed annually or as needed.
- Interested banks and DFIs must submit their applications for sanction of limits to the Director, Infrastructure, Housing & SME Finance Department, State Bank of Pakistan, I.I. Chundrigar Road, Karachi.
Grant of Refinance
- SBP will provide refinance to PFIs on a service charge (mark-up) basis, according to Section 17 (2) (d) and Section 22 of the State Bank of Pakistan Act, 1956.
- Refinance will be provided within two working days of receiving complete information as required, submitted to the concerned office(s) of SBP BSC (Bank).
Loan Repayment
- Principal Repayment: Loans must be repaid on the agreed date between PFI and the borrower, with the maximum tenor not exceeding one year.
- Early Repayment: If a borrower repays the loan before the due date, PFIs must repay the received amounts to the concerned SBP BSC (Bank) office within seven working days to avoid fines.
- Overdue Repayment: In case of overdue principal amounts, PFIs are entitled to charge a normal rate of markup besides taking other recovery actions. The PFI’s liability to SBP BSC (Bank) for repayment is not contingent on the borrower’s repayment.
- Mark-up Payment: Mark-up to SBP by PFIs shall be paid every quarter.
Other Terms and Conditions
- Exclusion of Running Finance: Running finance is not eligible under this scheme.
- Compliance with PRs: All financing under the scheme must adhere to relevant PRs of SBP and PFIs’ lending policies.
- Credit Appraisal: PFIs are responsible for conducting regular credit appraisals and pre & post-disbursement formalities.
- Business Needs: Financing under the scheme must meet the business needs of the borrowers.
- No Double Financing: PFIs must ensure that borrowers do not avail financing from multiple SBP schemes for the same business requirement.
- Credit Approval Process: PFIs should not take more than fifteen working days for SEs and twenty-five working days for MEs for the credit approval process. In case of rejection, PFIs must inform the prospective borrower of the reasons.
- Internal Audit Certification: PFIs must obtain certification from their Internal Audit confirming that the loan complies with the scheme’s terms and conditions. This certificate will be inspected by SBP’s Banking Inspection Department (BID).
- Scheme Inspection: SBP will check financing under the scheme during PFI inspections to ensure compliance.
- Violation Penalty: In case of violations, SBP reserves the right to recover the refinance amount along with a fine.
- Interpretation of Instructions: SBP’s decision will be final in case of any interpretation questions regarding the scheme.
By providing this refinance scheme, SBP aims to facilitate the growth and sustainability of SMEs, thereby contributing to the overall economic development of Pakistan. This initiative addresses the critical need for working capital financing in various SME sectors, ensuring they have the necessary support to thrive and expand.
FAQs: Refinance Scheme for Working Capital Financing of SME Sectors
1. What is the purpose of the Refinance Scheme for Working Capital Financing introduced by the State Bank of Pakistan (SBP)?
The Refinance Scheme aims to meet the working capital requirements of Small and Medium Enterprises (SMEs) in specific sectors identified by SBP. It facilitates easier access to finance, thereby supporting the growth and sustainability of SMEs and contributing to Pakistan’s economic development.
2. Which SME sectors are eligible under this scheme?
The scheme targets SMEs operating in the following sectors:
- Information Technology (IT)
- Gems and Jewelry
- Furniture
- Leather Industry
- Surgical Goods
- Fruits, Vegetables, and Food Processing & Packaging
- Dates Processing
- Printing & Packaging
3. What types of enterprises can apply for financing under this scheme?
Small Enterprises (SEs) and Medium Enterprises (MEs) are eligible:
- SEs are defined as per SBP’s Prudential Regulations (PRs).
- MEs with annual sales up to Rs 300 million can also apply.
4. What is the maximum financing limit available under this scheme?
- For SEs: As per SBP’s PRs for SME financing.
- For MEs: Up to Rs 50 million.
5. How long is the maximum loan tenor under this scheme?
The maximum loan tenor is one year.
6. Who can participate in this scheme as a financial institution?
All commercial Pakistan banks and Development Finance Institutions (DFIs) can take part.
7. What is the rate of mark-up charged under this scheme?
- End User Rate: Up to 6% per annum.
- Refinance Rate to PFIs: SBP provides refinance at 2% per annum, allowing PFIs a spread of up to 4% per annum.
8. How is the refinance allocated to participating financial institutions (PFIs)?
SBP allocates refinance limits to PFIs based on their requests, which are reviewed annually or as needed.
9. What are the repayment terms for loans obtained under this scheme?
Loans must be repaid on the agreed date, with the maximum tenor not exceeding one year. Early repayment requires PFIs to repay received amounts promptly to SBP to avoid penalties.
10. What are some important conditions and guidelines under this scheme?
- Running finance is not eligible.
- All financing must comply with SBP’s PRs and PFIs’ lending policies.
- PFIs are responsible for credit appraisals, pre and post-disbursement formalities, and obtaining internal audit certification.
- Borrowers cannot avail financing from multiple SBP schemes for the same business need.
- SBP reserves the right to inspect and penalize violations of scheme terms.
11. How can SMEs apply for financing under this scheme?
SMEs should approach their participating banks or DFIs to apply for financing under the Refinance Scheme. PFIs are responsible for processing applications within specific timelines and communicating reasons for rejection if applicable.
12. How does the SBP ensure compliance and oversight of the scheme?
SBP conducts inspections of PFIs to ensure compliance with scheme guidelines, including proper utilization of refinance and adherence to lending practices.
13. Where can I find more information about the Refinance Scheme?
For detailed information, interested SMEs and financial institutions can visit SBP’s official website or contact the Infrastructure, Housing & SME Finance Department at the SBP Head Office in Karachi.