SATURDAY MARCH 03: Small and Rural Enterprises: SBP extends loan period under Credit Guarantee Scheme

KARACHI: The State Bank of Pakistan (SBP) has announced extension of the loan period by two years under the Credit Guarantee Scheme for Small and Rural Enterprises. Credit Guarantee Schemes are programmes that ensure partial repayment of a loan in order to motivate lenders to lend to borrowers which would not have access to credit under normal circumstances.
Initially the tenor under the scheme was three (3) years, however the State Bank on March 1, 2012 revising the period has announced enhancement of the tenor by two years. "In order to further facilitate the Participating Financial Institutions (PFIs) under the Scheme, the maximum tenor for loans to Small Enterprises has been extended from three years to five years", said SBP's circular IH and SMEFD No 3 issued on Thursday.
According to circular all other instructions on the subject shall remain unchanged. "Although, there are two different schemes under Credit Guarantee Scheme for Small and Rural Enterprises, the scheme was for small enterprises, while other one was for farmers.
However, the SBP has enhances tenor only fort small enterprises and for farmers' scheme tenor will be same three years" bankers said. With current changes, under the scheme borrowers can avail loans for short term working capital and medium-term for a period up to five years, instead of three years, with maximum amount of Rs 15.0 (fifteen) million for Small Enterprises, they added.
SBP is regularly making changes to get maximum benefits of scheme. Loan size of scheme was enhanced as on February 14, 2011, after which loan size for small enterprises was surged from Rs 5 million to Rs 15 million. It may be recalled that the CGS for Small and Rural Enterprises was introduced in March, 2010 with the objective to promote availability of financing for low-end fresh/collateral deficient borrowers.
In addition, the seed money for the Scheme is provided by the UK's Department for International Development (UKAID) under the Financial Inclusion Program (FIP) and Federal Government, with the option of later being bolstered up through further allocation of funds from other sources including international/bilateral agencies.